SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended JUNE 30, 1998 Commission File Number 33-24608-LA
USA INTERNATIONAL CHEMICAL, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 95-4068292
(State of 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) (Zip Code)
Registrant's telephone number including area code: (818) 346-9595
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $-0-
The aggregate market value of the issuer's voting stock held by non-
affiliates of the issuer based upon the average bid and asked prices of
such stock as of July 31, 1998, was $346,319.
The number of shares outstanding of the issuer's common stock as of
August 21, 1998, was 1,341,809.
Documents Incorporated By Reference:
S-18 Registration Statement effective November 10, 1988.
Transitional Small Business Disclosure Format: Yes No X
<PAGE>2
PART I
ITEM 1. BUSINESS
THE COMPANY
- -----------
USA International Chemical, Inc. (the "Company" was originally incorporated in
the State of California on June 25, 1986. On August 22, 1988, the Company
changed its corporate domicile to the State of Delaware, through a merger into
a newly formed Delaware corporation named "USA International Chemical, Inc."
In April, 1989, the Company completed a public offering of 22,481,000 units,
each unit consisting of one share of common stock and one Class A purchase
warrant, at an offering price of $.01 per Unit. The net proceeds of that
offering to the Company were approximately $155,000.
On August 27, 1994, the Company's three largest shareholders (the "Selling
Shareholder Group") entered into a Stock Purchase Agreement in which they
agreed to sell 88,200,000 shares of the Company's common stock to Shane
Investment Company, Inc. for $69,000 in cash. These shares represented
approximately 78% of the Company's then outstanding common shares. This Stock
Purchase Agreement closed on September 23, 1994 at which time Shane Investment
Company, Inc. assumed ownership of the 88,200,000 shares of the Company's
common stock becoming the Company's largest single shareholder.
At that time Yale Farar became Chairman of the Board, President and Chief
Financial Officer of the Company while Harold S. Fleischman became a Director
and the Company's Secretary.
PAST OPERATIONS
- ---------------
In December 1989 the Company sold its customer list for sales of various
chemicals and other product lines for the maintenance of aircraft to Gerald
Fields & Co., an unaffiliated company, for $6,000. Gerald Fields & Co. also
received certain equipment and fixtures related to this business from the
Company and took over the Company's obligations under its lease on facilities
located in Rancho Cucamonga, California. The purchase price for the above
assets was $6,000, plus a five year earnout provision based on annual gross
sales in excess of $200,000. The earnout period expired in 1995 with no
additional consideration earned or paid to the Company.
Until September 1994 the Company sold a line of skin care products through a
foreign distributor. The Epicuren line of skin care products was manufactured
by Epicuren, Inc. of Mission Viejo, California, and includes a six step program
of scrub, cleanser, conditioner, concentrate, gel and moisturizer. The Company
had no written agreement with the manufacturer, but understood that it had the
sole right to distribute these products in Singapore.
Between July and September, 1994 the Company expanded its product line and sold
lint free cloth to a foreign customer.
The Company was also involved in the purchase and resale of various chemical
products to the Government of Taiwan. This line of business was also
discontinued in September 1994.
The Company's warranty obligations under its former lines of business are
limited to the replacement of defective products, which in turn are replaced by
the manufacturer.
<PAGE>3
PRESENT OPERATIONS
- ------------------
As a result of the change of control of the Company in September 1994, all past
business operations were discontinued and the Company does not expect to pursue
any of the Company's former lines of business. Consequently, since September
1994, the Company has had no operating revenues and the Company does not
anticipate any revenues from business operations until the Company develops or
acquires new business lines.
Since September 1994 and 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 a combination
with the Company. Pursuant to this activity, Management is constantly
evaluating and holding discussions with a variety of companies and individuals
that could result, in the near or distant future, in a business acquisition or
combination. Because of this approach, the announcement of a definitive or
consummated transaction involving the Company could happen at any time. There
can be no assurance as to when or if such an acquisition or combination might
occur or that other types of business transactions might not be considered and
entered into by the Company.
EMPLOYEES
- ---------
At present, the Company has one part-time employee. Yale Farar, the President
of the Company, devotes approximately 10% of his time to the Company's
business. Harold Fleischman, the Company's Secretary, is employed by the
Company on an as-needed basis.
ITEM 2. PROPERTIES
The Company's President currently provides office space to the Company at no
cost to the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
a. PRINCIPAL MARKET OR MARKETS. The Company's common stock is listed for
trading on the OTC Market's Electronic Bulletin Board where it is
currently listed under the symbol "USXC." The following table sets forth
the high and low bid quotations for the Company's stock, as reported by
the National Quotation Bureau, Inc. for the periods indicated. These
prices are believed to be representative inter-dealer quotations, without
retail markup, markdown or commissions, and may not represent actual
transactions.
<PAGE>4
COMMON STOCK
------------
BID ASK
----------- -----------
QUARTER ENDED HIGH LOW HIGH LOW
------------- ---- --- ---- ----
September 30, 1996 5/8 1/2 1 5/8 7/8
December 31, 1996 5/8 5/8 1 5/8 3/4
March 31, 1997 5/8 5/8 1 5/8 1 5/8
June 30, 1997 5/8 5/8 1 5/8 1 5/8
September 30, 1997 3/8 1/4 1 5/8 1 1/4
December 31, 1997 7/16 1/4 1 5/8 1
March 31, 1998 3/8 1/4 1 5/8 1 5/8
June 30, 1998 5/16 3/16 1 1/4 1 1/4
b. APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK. The approximate number of
----------------------------------------------
holders of the Company's common stock at August 21, 1998 was 250.
c. DIVIDENDS. Holders of common stock are entitled to receive such dividends
----------
as may be declared by the Company's Board of Directors. No dividends have
been paid with respect to the Company's common stock and no dividends are
anticipated to be paid in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
Since September, 1994 the Company has generated no revenues from operations.
At June 30, 1998, the Company had cash (and working capital) of $3,610,
compared to cash (and working capital) of $5,524 at June 30, 1997. During
fiscal 1998 and 1997, capital contributions of $10,000 and $41,000,
respectively were made to the Company by principal stockholders in order to
provide working capital necessary to continue operations.
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 fiscal years ended June 30, 1998 and 1997, the Company used cash of
$11,914 and $38,889, respectively, in operations.
The Company has no current operations which generate sales. Due to the
Company's current status, the "Year 2000 Problem" is not expected to have any
affect on the Company's current financial condition. Until the Company
develops or acquires new business lines, no operating revenues are expected and
operating losses are anticipated.
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 or other business combination. There can be no
assurance, however, that the Company will be successful in its efforts, or that
another type of business transaction might not be considered.
FINANCING ACTIVITIES
- --------------------
Net cash provided by financing activities was $10,000 for the year ended June
30, 1998, and $41,000 for the year ended June 30, 1997.
<PAGE>5
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED JUNE 30, 1998 AS COMPARED
- ----------------------------------------------------------------------------
TO THE FISCAL YEAR ENDED JUNE 30, 1997
- --------------------------------------
There were no sales nor cost of sales for the year ended June 30, 1998 or June
30, 1997.
General and Administrative expenses amounted to $11,114 for the year ended June
30, 1998, a decrease of $26,779 from the $37,893 for the year ended June 30,
1997. The decrease was principally the result of legal expenses and other
costs incurred in the 1997 fiscal year in connection with the evaluation of
potential merger opportunities.
Net loss amounted to $11,914 for the year ended June 30, 1998, compared to
$38,648 for the year ended June 30, 1997. The decrease in the net loss was the
result of reduced expenses discussed in the preceding paragraph.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED JUNE 30, 1997 AS COMPARED
- ----------------------------------------------------------------------------
TO THE FISCAL YEAR ENDED JUNE 30, 1996
- --------------------------------------
There were no sales or cost of sales for the year ended June 30, 1997 or
June 30, 1996.
General and administrative expenses increased $11,692 to $37,893 in 1997 from
$26,201 in 1996. The increase was principally from legal expenses and other
costs in 1997 in seeking and evaluating various opportunities to recapitalize
the Company as a going concern.
The net loss for the year ended June 30, 1997 was $38,648 compared to $27,051
for the fiscal year ended June 30, 1996. The increase in the net loss of
$11,597 was the result of increased expenses discussed in the preceding
paragraph.
The Company issued 6,000 shares of its common stock each to a director and a
financial consultant who rendered services to the Company during the 1996
fiscal year.
<PAGE>6
ITEM 7. FINANCIAL STATEMENTS
The financial statements are set forth on pages F-1 through F-7 attached as an
exhibit to this document. See "Item 13. Exhibits and Reports on Form 8-K."
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not Applicable.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
The Directors and Officers of the Company are as follows:
NAME AGE POSITION
--------- ---- ---------------
Yale Farar 60 Chairman of the Board, President and
Chief Financial Officer
Harold S. Fleischman 56 Director and Secretary
YALE FARAR has served as the Company's President, Chief Financial Officer,
Treasurer and Chairman since September 1994. Mr. Farar has been engaged in
venture capital and real estate activities for over 24 years. Mr. Farar has
been involved in, either directly or indirectly, loaning money to and taking
equity positions in various private and public companies.
HAROLD S. FLEISCHMAN has served as a Director and Secretary since September
1994. Mr. Fleischman has been an attorney for over 25 years and currently
maintains his own private practice in Encino, California. He earned both a
Bachelor's degree and Law degree from UCLA.
All directors of the Company hold office until the next annual meeting of the
shareholders or until their successors have been elected and qualified.
The officers of the Company are appointed by the Board of Directors and hold
office until their death, resignation or removal from office.
ITEM 10. EXECUTIVE COMPENSATION
During the last three fiscal years ended June 30, 1998, 1997 and 1996, the
Company did not pay or accrue any amounts for compensation to its Executive
Officers. The Company does not anticipate any salary to its Executive Officers
for the current fiscal year.
In fiscal year 1996 one officer of the Company received 6,000 shares of
restricted common stock as compensation for services as a Director. Although
Directors do not receive compensation for their services as such, they may be
reimbursed for expenses incurred in attending Board meetings.
On May 10, 1996 the Board of Directors adopted the USA International Chemical,
Inc. 1996 Stock Option Plan which is a non-qualified option plan under the
Internal Revenue Code (i.e. certain advantageous tax provisions are not
available to participants). The Company allocated 500,000 shares of common
<PAGE>7
stock which may be issued pursuant to the Stock Option Plan. Officers,
directors, employees and other persons rendering valuable services to the
Company are eligible to receive options pursuant to the Stock Option Plan. As
of June 30, 1998, no options had been granted under this Plan.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of August 21, 1998 the stock ownership of
each person known by the Company to be the beneficial owner of five percent or
more of the Company's Common Stock.
TITLE OF NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
CLASS BENEFICIAL OWNERS BENEFICIAL OWNERSHIP OF CLASS
- -------- -------------------- -------------------- --------
Common Yale Farar, President(1) 419,550 31.3%
20720 Ventura Blvd., Ste. 210
Woodland Hills, California 91364
Common Sim Farar(1)(2) 369,500 27.5%
20501 Ventura Blvd., Ste. 116 (Individually)
Woodland Hills, CA 91364
Common Justin B. Farar(2) 85,000 6.3%
20501 Ventura Blvd., Ste. 116 (Individually)
Woodland Hills, CA 91364
Common Joel D. Farar(2) 85,000 6.3%
20501 Ventura Blvd., Ste. 116 (Individually)
Woodland Hills, CA 91364
Common Beth Farar(3) 99,059 7.4%
15915 Ventura Blvd., Ste. 301 (Individually)
Encino, CA 91436
- ------------------
(1) Yale Farar and Sim Farar are brothers but disclaim any beneficial
ownership of each others shares.
(2) Justin Farar and Joel Farar are the sons of Sim Farar. Sim Farar may be
deemed to have beneficial ownership of the shares held by his younger son,
Joel, but disclaims beneficial ownership of shares held by his older son,
Justin.
(3) Beth Farar is the daughte of Yale Farar. Mr. Farar disclaims any
beneficial ownership of shares held by Ms. Farar.
The following table sets forth, as of August 21, 1998, the stock ownership of
each officer and director individually and all directors and officers of the
Company as a group.
<PAGE>8
TITLE OF NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
CLASS BENEFICIAL OWNERS BENEFICICAL OWNERSHIP OF CLASS
- -------- -------------------- --------------------- --------
Common Yale Farar, President 419,550 31.3%
20720 Ventura Blvd., Ste. 210
Woodland Hills, CA 91364
Common Harold S. Fleischman, Director 6,000 0.4%
15915 Ventura Blvd., Ste. 301
Encino, California 91436
Common Ownership by Management as a 425,550 31.7%
Group (2 persons)
- -------------------------------------------------------
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Yale Farar and Sim Farar (principal shareholders of the Company) have invested
funds in the Company to pay for operating expenses and to provide working
capital to the Company. During fiscal year 1998, these contributions totaled
$10,000 which were reflected in the financial statements as additional paid in
capital.
The Company's principal shareholders anticipate making additional contributions
or advances to the Company on an as-needed basis until such time as the Company
establishes or acquires an operating business.
Subsequent to the Company's fiscal year-end, Yale Farar resigned his positions
as a Board member and as President and Chief Financial Officer of the Company.
Mr. Farar will continue to assist the Company in achieving its business
objectives but will now share his time to pursue other business interests.
Harold Fleischman assumed the position of President and Chief Financial Officer
effective September 1, 1998. Also effective September 1, 1998, Mr Arthur Lyons
was appointed to the Company's Board of Directors and appointed corporate
Secretary.
Mr. Lyons has been a businessman and restauranteur in Southern California for
over twenty years. Mr. Lyons served on the Palm Springs, California City
Council from 1992 to 1996. He is the author of twelve mystery novels/short
stories and has written screenplays for television. Mr. Lyons is a graduate of
the University of California at Santa Barbara.
As of September 1, 1998, the Company's executive offices will be maintained at
15915 Ventura Boulevard, Suite 301, Encino, California 91436. The Company's
new phone number will be (818) 783-0393. Such space and phone service will be
provided by Mr. Fleischman at no charge.
<PAGE>9
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are being filed as part of this report:
PAGE
(1) FINANCIAL STATEMENTS
Report of Independent Auditors - Ernst & Young LLP....F-1
Balance sheet as of June 30, 1998.....................F-2
Statements of Operations for the years ended
June 30, 1998 and 1997................................F-3
Statements of Stockholders' Equity for the
years ended June 30, 1998 and 1997....................F-4
Statements of Cash Flows for the years ended
June 30, 1998 and 1997................................F-5
Notes to Financial Statements..................F-6 to F-7
(2) EXHIBITS
EXHIBIT
NO. DESCRIPTION LOCATION
- ------- --------------------------- --------------------------
3.1 Articles of Incorporation and Incorporated by reference to
Bylaws Exhibit No. 3.1 to the
Registrant's S-18 Registration
Statement (No. 33-24608-LA)
(b) Reports on Form 8-K:
None.
<PAGE>10
SIGNATURES
- ----------
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
USA INTERNATIONAL CHEMICAL, INC.
Dated: September 4, 1998 By: HAROLD S. FLEISCHMAN
---------------------
Harold S. Fleischman, President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
SIGNATURE CAPACITY DATE
HAROLD S. FLEISCHMAN President, Chief Executive September 4, 1998
- -------------------- Officer, Treasurer, (Principal
Harold S. Fleischman Financial and Accounting Officer)
and Director
ARTHUR LYONS Secretary and Director September 8, 1998
- ------------
Arthur Lyons
<PAGE>11
Supplemental Information to be Furnished with Reports Filed Pursuant to Section
15(d) of the Act by Non-reporting Issuers.
No annual report or proxy material has been sent to security holders during the
last fiscal year.
<PAGE>12
Financial Statements
USA International Chemical, Inc.
YEARS ENDED JUNE 30, 1998 AND 1997
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>F-1
Report of Independent Auditors
Board of Directors
USA International Chemical, Inc.
We have audited the accompanying balance sheet of USA International
Chemical, Inc. as of June 30, 1998, and the related statements of operations,
stockholders' equity, and cash flows for each of the two years in the period
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of USA International
Chemical, Inc. as of June 30, 1998, and the results of its operations and its
cash flows for each of the two years in the period then ended in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that USA
International Chemical, Inc. will continue as a going concern. As discussed in
Note 1 to the financial statements, under existing circumstances, there is
substantial doubt about the ability of USA International Chemical, Inc. to
continue as a going concern at June 30, 1998. Management's plans in regard to
that matter also are described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
ERNST & YOUNG
Los Angeles, California
August 6, 1998
<PAGE>F-2
USA International Chemical, Inc.
Balance Sheet
June 30, 1998
ASSETS
Current assets:
Cash $ 3,610
----------
Total assets $ 3,610
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ -
Stockholders' equity:
Common Stock, $.00001 par value,
authorized 50,000,000 13
shares, issued and outstanding 1,341,809
shares (NOTE 4)
Additional paid-in capital 321,167
Retained deficit (317,570)
----------
Total stockholders' equity 3,610
----------
Total liabilities and stockholders' equity $ 3,610
==========
SEE ACCOMPANYING NOTES.
<PAGE>F-3
USA International Chemical, Inc.
Statements of Operations
YEAR ENDED JUNE 30
1998 1997
--------------------------
Sales $ - $ -
General and administrative expenses 11,114 37,893
---------------------------
11,114 37,893
---------------------------
Loss before income tax provision (11,114) (37,893)
Income tax provision 800 755
---------------------------
Net loss $ (11,914) $ (38,648)
===========================
Net loss per share (basic and diluted) $ (.01) $ (.03)
============================
Weighted average shares outstanding 1,341,809 1,341,809
=============================
SEE ACCOMPANYING NOTES.
<PAGE>F-4
USA International Chemical, Inc.
Statements of Stockholders' Equity
Additional
Common Stock
------------------- Paid-In Retained
Shares Amount Capital Deficit Total
-------------------------------------------------
Balance at
June 30, 1996 1,341,809 $ 13 $270,167 $(267,008) $ 3,172
Capital contributions - - 41,000 - 41,000
Net loss for year ended
June 30, 1997 - - - (38,648) (38,648)
----------------------------------------------
Balance at
June 30, 1997 1,341,809 13 311,167 (305,656) 5,524
Capital contributions 10,000 10,000
Net loss for year ended
June 30, 1998 (11,914) (11,914)
---------------------------------------------------
Balance at
June 30, 1998 1,341,809 $ 13 $321,167 $(317,570) $ 3,610
===================================================
SEE ACCOMPANYING NOTES.
<PAGE>F-5
USA International Chemical, Inc.
Statements of Cash Flows
YEAR ENDED JUNE 30
1998 1997
--------------------------------
OPERATING ACTIVITIES
Net loss $ (11,914) $ (38,648)
Adjustments to reconcile net loss
to net cash used in
operating activities:
Changes in operating assets
and liabilities:
Accounts payable and accrued
expenses - (241)
--------------------------------
Net cash used in operating activities (11,914) (38,889)
FINANCING ACTIVITIES
Capital contributions 10,000 41,000
-------------------------------
Net cash provided by financing activities 10,000 41,000
-------------------------------
Net increase (decrease) in cash (1,914) 2,111
Cash at beginning of year 5,524 3,413
-----------------------------
Cash at end of year $ 3,610 $ 5,524
==============================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes $ 800 $ 755
==============================
SEE ACCOMPANYING NOTES.
<PAGE>F-6
USA International Chemical, Inc.
Notes to Financial Statements
June 30, 1998
1. BASIS OF PRESENTATION
USA International Chemical, Inc. (the Company) was incorporated
in the state of Delaware and since September 1994 the Company has
no operating revenue and does not anticipate any revenues from
business operations until the Company develops or acquires new
business lines. 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INCOME TAXES
At June_30, 1998, the Company has federal and state operating
loss carryforwards of approximately $260,000 and $109,000,
respectively, expiring in years 2004 through 2014. As a result of
a change in ownership in 1994, the Company does not believe it
will be able to utilize approximately $177,000 (federal) and
$67,000 (state) of these operating loss carryforwards to reduce
future taxable income. With respect to the remaining operating
loss carryforwards of $83,000 (federal) and $48,000 (state),
future ownership changes would result in an annual limitation on
their utilization. No benefit has been recorded in the financial
statements related to such operating losses as their realization
is not assured.
NET LOSS PER SHARE
Net loss per share has been computed based on the weighted
average common shares outstanding during each year.
CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and on deposit and
highly liquid investments with maturities of three months or
less.
<PAGE>F-7
USA International Chemical, Inc.
Notes to Financial Statements
June 30, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in accordance with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
3. RELATED PARTY TRANSACTIONS
The Company maintains its executive offices in space provided by
the Company's President at no charge.
During 1997 and 1998, the Company did not pay or accrue any
amounts for compensation to officers.
4. STOCKHOLDERS' EQUITY
The Company has a USA International Chemical, Inc. 1996 Stock
Option Plan (Plan). The Plan is a nonqualified plan under which
options to purchase up to 500,000 shares of Common Stock may be
issued. The exercise price shall be determined by the Plan
administrator; however, in the case of Incentive Stock Option
grants, the exercise price shall be 100% of the fair market value
at date of grant (110% in the case of options granted to an
optionee who owns more than 10% of the Company's Common Stock).
Option terms shall be determined by the Plan administrator, but
no later than 10 years after date of grant or five years for
Incentive Stock Options to optionees who own more than 10% of the
Company's Common Stock.
No options have been granted under the Plan.
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
10-KSB FOR THE PERIOD ENDED JUNE 30, 1998 FOR USA INTERNATIONAL
CHEMICAL, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,610
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,610
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,610
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 13
<OTHER-SE> 3,597
<TOTAL-LIABILITY-AND-EQUITY> 3,610
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,114
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (11,114)
<INCOME-TAX> 800
<INCOME-CONTINUING> (11,914)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,914)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
