U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995
--- TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
Commission File Number 0-17963
U.S. ENVIRONMENTAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 11-2906904
(State or other jurisdiction of) (I.R.S. Employer
incorporation or organization) Identification No.)
630 Parkview Tower
First Avenue
King of Prussia, Pennsylvania 19406
(Address of principal executive offices) (Zip Code)
(610) 337-4935
(Issuer's telephone number)
................................................................................
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act during the past 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
--- ---
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years.
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes No
--- ----
Applicable only to corporate issuers
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Common stock $.0001 par value - 35,290,163 shares as of December 31, 1995
<PAGE>
U.S. ENVIRONMENTAL, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
December 31, 1995
INDEX
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets F-1 & F-2
Consolidated Statements of Operations F-3
Management Notes to Consolidated Financial Statements 4
Item 303. Management's Discussion and Analysis or 5
Plan of Operation
PART II - OTHER INFORMATION
Items 1 through 6 6
Signatures 7
<PAGE>
U.S. ENVIRONMENTAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 (COMPILED) AND SEPTEMBER 30, 1995
ASSETS
December 31, September 30,
1995 1995
------------ -------------
CURRENT ASSETS:
Cash $ 460 $ 919
Prepaid expenses 10,500 10,500
---------- -----------
TOTAL CURRENT ASSETS 10,960 11,419
---------- -----------
PROPERTY AND EQUIPMENT - AT COST:
Furniture and equipment 478 478
Less accumulated depreciation 357 329
---------- -----------
PROPERTY AND EQUIPMENT - NET 121 149
---------- -----------
OTHER ASSETS:
License agreements (net of accumulated
amortization) of $688,296 in 1995 and
$571,080 in 1994 1,601,117 1,656,031
Patent (net of accumulated amortization)
of $385,604 in 1995 and $315,291 in 1994 713,396 739,396
---------- -----------
TOTAL OTHER ASSETS 2,314,513 2,395,427
---------- -----------
TOTAL ASSETS $2,325,594 $2,408,525
========== ==========
F-1
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, September 30,
1995 1995
------------ -------------
CURRENT LIABILITIES:
Notes payable:
Shareholders $ 82,833 $ 82,833
Others 154,000 154,000
Accounts payable and accrued expenses 304,568 321,445
----------- -----------
TOTAL CURRENT LIABILITIES 541,401 558,278
----------- -----------
SHAREHOLDERS' EQUITY:
Common stock, .0001 par value; 100,000,000
shares authorized; 35,290,163 shares issued
and outstanding in March 31, 1995 and
35,290,163 shares issued and outstanding at
September 30, 1995 3,529 3,529
Capital in excess of par value 4,630,738 4,630,738
Deficit accumulated during the development
stage (2,784,020) (2,784,020)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 1,850,247 1,850,247
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,408,525 $2,408,525
========== ==========
F-2
<PAGE>
U.S. ENVIRONMENTAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 (COMPILED) AND 1994
AND THE PERIOD FEBRUARY 18, 1988 (INCEPTION) TO DECEMBER 31, 1995
February 18, 1988
Three Months (Inception) to
Ended December 31, December 31, 1995
------------------ -----------------
1995 1994
---- ----
DEVELOPMENT STAGE EXPENSES:
Research and development $ 56,508
General and administrative $ 17,400 $ 15,400 1,733,458
Depreciation and amortization 89,145 93,795 1,207,755
---------- ---------- -----------
TOTAL DEVELOPMENT STAGE EXPENSES 106,545 109,195 2,995,755
---------- ---------- -----------
LESS REVENUE FROM DEMONSTRATION FEES 180,000
-----------
NET DEVELOPMENT STAGE EXPENSES 2,819,137
-----------
OTHER INCOME (EXPENSES):
Interest income 1,429
Forgiveness 36,071
Loss on abandonment of assets (2,388)
-----------
TOTAL OTHER INCOME (EXPENSES) -0- -0- 35,112
---------- ---------- -----------
NET INCOME (LOSS) $ (106,545) $ (109,195) $(2,782,735)
-----------
NET LOSS PER SHARE ( .002) ( .002) ( .116)
---------- ---------- -----------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 34,435,163 34,435,163 23,967,539
========== ========== ==========
F-3
<PAGE>
U.S. ENVIRONMENTAL, INC.
(A Development Stage Enterprise)
MANAGEMENT NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 303 of Regulation
S-B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three months ended December 31, 1995 are not
necessarily indicative of the results that may be expected for the year ended
September 30, 1996.
Revenue recognition
The Subsidiary will recognize revenue upon the sale of its technology to
end users as well as through sub-license agreements.
Net loss per share
Net loss per share is computed based on the average number of common
shares outstanding during each period. Fully diluted loss per share amounts are
not presented for each period because they would be anti-dilutive.
Patent
The cost of a patent is being amortized over the remaining estimated
economic life of sixteen years. Amortization expense charged to operations was
$70,313 and $35,734 for the year ended September 30, 1995 and the three months
ended December 31, 1995, respectively.
Securities
None
Statement of cash flows
For purposes of the statements of cash flows, the Companies consider all
time deposits with maturities of three months or less as cash equivalents.
4
<PAGE>
2. NOTES PAYABLE
Long Term Convertible
Eleven (11) long term convertible notes have not been converted to
common stock with a total outstanding principal balance of $144,000 at an 11%
annual interest rate. Five of the noteholders have requested the notes be
extended and six of the outstanding notes are in default in the total amount of
$85,000 and continuing to accrue interest at 11% annual rate until the principal
in default is satisfied in full.
Item 303 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(A) Plan of Operation
(i) The Company has available a limited amount of cash as a result
of its private placement of restricted common stock at $.1667 per share
on September 22, 1992 of $125,000. Such limited liquidity will not be sufficient
to meet the currently restricted operating expenses and the legal and
accounting expenses anticipated for the next twelve months, it is likely
that, without additional cash, the Company will not be able to
aggressively pursue its business and meet unforeseen contingencies such as
required payment of debt service. Management believes that additional
funds may be available from anticipated revenues of the Company of which
there can be no assurance that such will materialize, and from loans of
subsidies from Geotech or its principals.
(ii) The Company is working in conjunction with its Licensor to
develop technology for a permanent water cooled pouring orifice assembly to be a
replacement for traditional assemblies that require replacement every 60 to 90
days of operation.
(iii) The Company's contract negotiations have been proceeding
favorably for the sale of a large mineral fusion facility to its Licensee in
Japan
(iv) The Company's negotiations for a 200 ton per day mineral fusion
facility to be located in Germany are encouraging.
(v) The Company has no plans to hire personnel during the next six
months.
5
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
The outstanding convertible notes of the Company issued pursuant
to a private placement in October, 1990 matured on December 31, 1992 unless
converted to the common stock of the Company prior to such date.
An aggregate of $55,000 face value of the convertible notes
was converted into common stock.
Four noteholders, holding an aggregate of $47,000 face value of
the convertible notes, have agreed to an extension of the notes until December
31, 1993, at an interest rate of 11% per annum. Such extended notes will no
longer have the right to convert into common stock.
One noteholder is deceased and the company has received
instructions to transfer the claims of the note to the estate; the Company
intends to pay the outstanding principal of $12,000 and accrued interest
thereon.
Convertible notes held by six noteholders with face values
aggregating $85,000 are currently in default.
In view of the above, the convertible notes have been
reclassified as "short term".
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
None.
6
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
U.S. ENVIRONMENTAL, INC.
(Registrant)
Date __________________________ ________________________________
By: Thomas B. West, Board Chairman,
Chief Executive Officer,
Director
Date __________________________ ________________________________
By: Philomena A. Dietrich, Sec.,
Treasurer and Chief Financial
Officer
Date: February 15, 1996
7
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Sep-30-1996
<PERIOD-START> Oct-01-1995
<PERIOD-END> Dec-31-1995
<CASH> 460
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,960
<PP&E> 478
<DEPRECIATION> 357
<TOTAL-ASSETS> 2,325,594
<CURRENT-LIABILITIES> 541,401
<BONDS> 0
0
0
<COMMON> 3,529
<OTHER-SE> 1,846,718
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<CGS> 0
<TOTAL-COSTS> 0
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<INCOME-PRETAX> (106,545)
<INCOME-TAX> 0
<INCOME-CONTINUING> (106,545)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (106,545)
<EPS-PRIMARY> (.002)
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