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 June 30, 1997
-----------------
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to __________
Commission File Number 0-17963
U.S. ENVIRONMENTAL, INC.
-----------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 11-2906904
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
8130 66th Street North, Suite 6, Pinellas Park, Florida 33781
----------------------------------------
(Address of Principal Executive Offices)
(727) 548-4300
--------------
(Issuer's Telephone Number)
Check whether the issuer: (1) 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 a
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 No X
--- ---
The number of shares outstanding of the Issuer's Common Stock, $.0001 Par
Value, as of June 30, 1997 was 76,693,303.
Transitional Small Business Disclosure Format:
Yes No X
--- ---
<PAGE>
i
(DEL) U.S. ENVIRONMENTAL, INC. AND SUBSIDIARY
Index
Page
----
Part I - Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -
June 30, 1997 and September 30, 1996......................... 1
Consolidated Statements of Operations -
Three months and nine months ended June 30, 1997 and 1996.... 2
Notes to Consolidated Financial Statements..................... 3 - 4
Part II - Other Information
Item 1. Legal Proceedings............................................... 5
Signatures..................................................... 5
i
<PAGE>
(DEL) U.S. ENVIRONMENTAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
---------------- -----------------
---------------- -----------------
(unaudited)
<S> <C> <C>
Assets
Current assets
Cash $ 149,825 $ 351,713
Accounts receivable 5,000 -
Prepaid expenses 55,500 5,500
---------------- -----------------
---------------- -----------------
Total current assets 210,325 357,213
---------------- -----------------
---------------- -----------------
Property and equipment 252,319 478
Less accumulated depreciation 10,311 372
---------------- -----------------
---------------- -----------------
242,008 106
---------------- -----------------
---------------- -----------------
Other assets
Marketable securities - at lower of aggregate cost or market 1,530 1,530
License, net of accumulated amortization 1,538,815 1,538,815
Patent, net of accumulated amortization 669,083 669,083
Prepaid rent and other assets - -
---------------- -----------------
---------------- -----------------
2,209,428 2,209,428
---------------- -----------------
---------------- -----------------
Total assets 2,661,761 2,566,747
================ =================
================ =================
Liabilities and Stockholders' Equity
Current liabilities
Notes payable:
Shareholders 62,832 92,833
Others 30,542 148,000
Accounts payable & accrued expenses 221,534 370,210
Current portion of notes payable and long-term debt 24,000 -
Accrued interest - -
---------------- -----------------
---------------- -----------------
Total current liabilities 338,908 611,043
---------------- -----------------
---------------- -----------------
Long-term debt, net of current maturities
Notes payable, net of current maturities 120,000 -
Stock payable - -
---------------- -----------------
---------------- -----------------
Total long-term debt, net of current maturities 120,000 -
---------------- -----------------
---------------- -----------------
Total Liabilities 458,908 611,043
---------------- -----------------
---------------- -----------------
Stockholders' equity
Common stock, par value $.0001
Authorized 100,000,000 shares,
76,693,303 and 43,891,909 issued and outstanding, respectively 7,669 4,389
Additional paid-in capital 5,732,894 5,225,568
Deficit accumulated during the development stage (3,537,710) (3,274,253)
---------------- -----------------
---------------- -----------------
Total stockholders' equity 2,202,853 1,955,704
---------------- -----------------
---------------- -----------------
Total liabilities and stockholders' equity $ 2,661,761 $ 2,566,747
================ =================
================ =================
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
(DEL) U.S. ENVIRONMENTAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
February 18, 1988
For the Three Months Ended For the Nine Months Ended (Inception) to
--------------------------- --------------------------- ---------------
June 30, June 30, June 30, June 30, June 30,
1997 1996 1997 1996 1997
------------ ---------- ------------ ---------- ---------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenue from demonstration fees $ - $ - $ 5,000 $ - $ 280,000
------------ ---------- ------------ ---------- ---------------
Development stage expenses
Research and development - - - - 169,020
General and administrative 288,020 (600) 448,607 19,300 2,465,214
Depreciation and amortization 4,253 - 14,104 84,640 1,412,847
------------ ---------- ------------ ---------- ---------------
Total development stage expenses 292,273 (600) 462,711 103,940 4,047,081
------------ ---------- ------------ ---------- ---------------
Net development stage expenses 292,273 (600) 457,711 103,940 3,767,081
------------ ---------- ------------ ---------- ---------------
Other income (expense)
Interest expense - - (3,512) - (3,512)
Interest income 218 - 218 - 1,647
Miscellaneous income - - - - 5
Loss on impairment of assets - - - - (2,388)
------------ ---------- ------------ ---------- ---------------
Total other income (expense) 218 - (3,294) - (4,248)
------------ ---------- ------------ ---------- ---------------
Net loss before income taxes and
extraordinary gain (292,055) 600 (461,005) (103,940) (3,771,329)
Income taxes
Deferred income tax benefit - - - - -
------------ ---------- ------------ ---------- ---------------
Net loss before extraordinary gain (292,055) 600 (461,005) (103,940) (3,771,329)
Extraordinary gains
Extraordinary gain on forgiveness of debt - - 197,548 - 233,619
------------ ---------- ------------ ---------- ---------------
Net income (loss) $ (292,055) $ 600 $ (263,457) $(103,940) $ (3,537,710)
============ ========== ============ ========== ===============
Loss per common share
Loss before extraordinary gain (0.005) 0.000 (0.009) 0.000 (0.146)
Extraordinary gain on forgiveness of debt 0.000 0.000 0.004 0.000 0.009
Net income (loss) per common share $ (0.005) $ 0.000 $ (0.005) $ 0.000 $ (0.137)
============ ========== ============ ========== ===============
Weighted average number of
common shares outstanding 64,243,980 34,435,163 48,807,810 34,435,163 25,914,419
============ ========== ============ ========== ===============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
(DEL) U.S. ENVIRONMENTAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of presentation
The accompanying unaudited consolidated financial statements, which are for
interim periods, do not include all disclosures provided in the annual
consolidated financial statements. These unaudited financial statements should
be read in conjunction with the financial statements and the footnotes thereto
contained in Form 10-KSB for the fiscal period ended September 30, 1996 of U.S
Environmental, Inc. (the "Company"), as filed with the Securities and Exchange
Commission.
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (which are of a normal and recurring nature) necessary
for a fair presentation of the financial statements. The results of operations
for the three months and nine months ended June 30, 1997 are not necessarily
indicative of the results to be expected for the full year.
Note 2 - Per share calculations
Per share data was computed by dividing net loss by the weighted average number
of shares outstanding during the respective periods.
Note 3 - Subsequent events
In September 1996, the Company entered into a three-phase stock purchase
agreement with Kilgarvan Investment & Holding, Ltd. (Kilgarvan), Dublin,
Ireland, an outside investor. The Agreement committed Kilgarvan to a total stock
purchase to equal 40.47% of the Company's fully diluted shares of Common Stock
for an aggregate amount of $4.0 million. The purchase was to take place in
stages based on the occurrence specified events and within certain periods of
time.
The Agreement gave Kilgarvan also the option to purchase an additional
12,000,000 shares of Company Common Stock as part of a forth and final funding
at a share price that was not to exceed $2.00 per share and to give the investor
a 51% controlling stake of the Company's fully diluted voting stock. The
operating capital from the equity purchases by Kilgarvan was to be used to
expand the Company's efforts to further develop its marketing and sales effort
for the implementation of vitrification plants.
The initial purchase (Phase 1) of 6,333,746 shares of Common Stock was for
$500,000 giving Kilgarvan an 14.53% stake of the fully diluted equity security
of the Company. The company paid $60,000 in costs and issued 300,000 shares of
Common Stock in connection with this purchase.
On April 17, 1997, due to disagreements between the Company's former management,
directors and Kilgarvan as to the Company's performance as stipulated in the
September 1996 stock purchase agreement as well as the usage of proceeds of the
initial funding, the Company terminated the existing agreement prior to its
completion of the second, third and optional forth phase and replaced it with a
new subscription agreement.
The new stock purchase agreement dated April 17, 1997, increased Kilgarvan's
interest to 51% of the fully diluted equity securities of the Company. The
company issued 30,447,394 shares of Company Common Stock for $326,000.
The subscription agreement provides the investor with an anti-dilution clause to
retain its 51% stake on a fully diluted basis up to the point when all 100
million authorized shares haven been issued. In September 1997, additional
4,760,091 shares of Company Common Stock were issued to the investor pursuant to
this clause. Subsequent to fiscal year end September 30, 1997, the Company
reserved and additional 1,144,898 shares to be issued in accordance with the
anti-dilution clause.
3
<PAGE>
(Continued)
On April 18, 1997, the Company entered into a "Management Agreement" with Swiss
American Capital Management, Inc. (SwissAm). Under the terms of this agreement,
SwissAm is providing support for general management and operations including
budgeting, accounting and control systems, reporting, regulatory compliance,
sales and marketing efforts and provide specialized expertise through its duly
licensed and competent personnel.
SwissAm also provides the Company with office space and logistics such as
computers, communications equipment etc. The Company paid $254,649 in management
fees to this related company.
4
<PAGE>
(DEL) U.S. ENVIRONMENTAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 5. Other Information
Item 6. Exhibits and reports on Form 8K
Exhibit 1. Kilgarvan Investment & Holding Company Subscription
Agreement is incorporated herein by reference.
Exhibit 2. Swiss American Capital Management, Inc. Management
Agreement is incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant had
duly caused the report to be signed on its behalf by the undersigned thereunto
duly authorized.
U.S Environmental, Inc.
Dated : 9/2/98 /s/ Robert W. Lewis
-------------------
Robert W. Lewis
Chief Financial Officer
5
<PAGE>
Exhibit 1
(DEL) U.S. ENVIRONMENTAL, INC.
SUBSCRIPTION AGREEMENT
1. General:
This Subscription Agreement sets forth the terms under which the
undersigned investor, KILGARVAN INVESTMENT & HOLDING COMPANY, LIMITED (the
"Investor"), will acquire 30,447,394 shares of the Common Stock, $.001 par value
per share (the "Shares"), subject to adjustment as provided for herein, for an
aggregate purchase price of $326,000 (U.S.) of (DE) U.S. ENVIRONMENTAL, INC., a
Delaware corporation (the "Company").
The Shares are being sold by the officers and directors of the
Company. There will be no sales commissions paid, and the Company will receive
the entire offering proceeds.
The Shares are being offered by the Company to a suitable Investor
pursuant to Rules 504 or 506 of Regulation D and Section 4(2) of the Securities
Act of 1933, as amended. Execution of this Subscription Agreement by the
Investor shall constitute an offer by the Investor to subscribe for the Shares
on the terms and conditions specified herein. The Company reserves the right to
reject such subscription offer, or, by executing a copy of this Subscription
Agreement, to accept such offer. If the Investor's offer is accepted, the
Company will execute this Subscription Agreement and issue the Shares. If the
Investor's offer is rejected, the payment accompanying this Subscription
Agreement will be returned to the Investor, with no interest thereon, with the
notice of rejection.
2. Acceptance of Subscription Agreement:
It is understood and agreed by the undersigned that the Company will
have the unconditional right to reject this subscription, in whole or in part,
if it believes that the undersigned is not a qualified purchaser under
Regulation D promulgated under the Securities Act of 1933, as amended, or for
any other reason.
3. Investor's Representations, Warranties and Covenants:
The Investor represents, warrants and covenants to the Company as
follows:
a. He acknowledges that he has been furnished with and has been given
access to all underlying documents in connection with this transaction as well
as such other information as he deems necessary or appropriate as a prudent and
knowledgeable investor in evaluating his investment in the Shares. He further
acknowledges that the Company has given him the opportunity to obtain additional
information and to evaluate the merits and risks of his investment. He
acknowledges that he has had the opportunity to ask questions of, and receive
satisfactory answers from, the officers and directors of the Company concerning
the terms and conditions of the offering.
b. He acknowledges that this transaction has not been scrutinized by
the United States Securities and Exchange Commission or by any state securities
commissions.
c. He has adequate means of providing for his current and future needs
and possible personal contingencies, and has no need for liquidity of his
investment in the Shares.
d. He can bear the economic risk of losing his entire investment in the
Shares.
e. He is acquiring the Shares for his own account, for investment only
and not with a view toward the resale, fractionalization, division or
distribution thereof and he has no present plans to enter into any contract,
undertaking, agreement or arrangement for any such resale, distribution,
division or fractionalization thereof.
<PAGE>
f. He does not have an overall commitment to investments which are not
readily marketable, including the Shares and other similar investments,
disproportionate to his net worth or gross income.
g. He understands that the offer and sale of the Shares is being made by
means of a private placement of Shares and that he has read or reviewed and is
familiar with this Subscription Agreement.
h. He and his agents or advisers have had an opportunity to ask
questions of and receive answers from the Company, or a person or persons acting
on its behalf, concerning the terms and conditions of this Subscription
Agreement and the transactions contemplated hereby and thereby, as well as the
affairs of the Company and related matters.
i. He has had an opportunity to obtain additional information necessary
to verify the accuracy of the information referred to in subparagraph (i)
hereof.
j. HE UNDERSTANDS THAT THE COMPANY HAS A LIMITED FINANCIAL AND OPERATING
HISTORY.
k. HE UNDERSTANDS THAT THE SHARES ARE A SPECULATIVE INVESTMENT WHICH
INVOLVES A HIGH DEGREE OF RISK OF LOSS BY HIM OF HIS ENTIRE INVESTMENT. CERTAIN
OF THE RISKS CONCERNING AN INVESTMENT IN THE SHARES ARE SET FORTH BELOW.
(i) Limited Operating History. To date, the Company has not
generated profitable operations. There can be no assurance the Company will be
profitable or that it will be able to expand its operations. The Company's
success is dependent upon its ability to develop new sources of revenue and to
obtain adequate financing for the expansion of its business. There is no
assurance that the Company will be able to develop such revenue or obtain such
financing. The growth of the Company's operations are subject to all of the
risks inherent in development of any new business enterprise, including the lack
of an operating history. The likelihood or success of the Company should be
considered in light of the problems, expenses and delays which are frequently
encountered in the formation of a new business and the competitive environment
in which the Company will operate. See the attached Business Plan for further
information.
(ii) Commercial Acceptance. While the Company believes that a
commercial market exists for its products, there can be no guaranty that such a
market will develop or develop to the extent that the Company anticipates.
(iii) Technological Change. The Company's products are in an area
which may experience significant technological change. The Company expects that
its technology will continue to develop rapidly, and the Company's future
success will depend, in large part, on its ability to maintain a competitive
position with respect to its technology. Rapid technological change could result
in the Company's products becoming obsolete, which could adversely effect the
Company's operations in the future.
(iv) Dilution. The net tangible book value per share of the
Shares after the offering will be substantially less than the price of the
Shares offered hereby. Thus, Investor acquiring Shares in this offering will be
subject to immediate substantial dilution.
(v) Requirement for Additional Funds. It is anticipated that all
of the proceeds from the Shares will be utilized to fund the Company's projected
operating needs for the next 6 months. There is no assurance that the Company
will not require additional capitalization after expending all the proceeds of
this offering. In such event, the failure of the Company to secure additional
funds necessary to finance continued operations will have an adverse impact on
the financial position and growth of the Company, and could result in the loss
by Investor of the entire investment in the Company. The Company currently has
no alternative sources of financing available to it, and there can be no
assurance that alternative financing will be available or available on
acceptable terms when and if the Company requires such financing.
<PAGE>
(vi) No Market. THERE IS CURRENTLY A LIMITED MARKET FOR THE
SHARES AND THERE CAN BE NO ASSURANCE THAT ONE MAY DEVELOP IN THE FUTURE.
BECAUSE THE SHARES ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER UNDER
CERTAIN LAWS AND REGULATIONS, AND BECAUSE THERE IS NO MARKET FOR THE SHARES,
INVESTORS SHOULD PURCHASE THE SHARES ONLY AS A LONG-TERM INVESTMENT, AS THEY MAY
NOT BE ABLE TO LIQUIDATE THEIR INVESTMENT IN THE SHARES IN EVENT OF AN EMERGENCY
OR FOR ANY OTHER REASON.
(vii) Determination of Offering Price of Shares. The offering
price for the Shares has been determined arbitrarily and is not an indication of
the value of the Shares or the assets or earnings of the Company.
(viii) No Assurance of Dividends on the Shares; No Likelihood of
Future Dividends on Common Stock. The Company has never paid and does not expect
to pay in the foreseeable future any cash dividends on its Common Stock. It is
anticipated that any earnings which may be generated from operations of the
Company will be used to finance the growth of the Company.
(ix) Limitation on Officer and Director Liability;
Indemnification. In accordance with Delaware law, the Company's Articles of
Incorporation and Bylaws contain provisions providing for the maximum
indemnification provided under Delaware law for officers, directors, employees
and agents.
As a result of the inclusion of such provisions, neither the Company nor its
stockholders may be able to recover monetary damages against officers,
directors, employees and agents of the Company for actions taken by them, and,
with respect to directors, which actions are ultimately found not to have
violated the specific provisions enumerated above, although it may be possible
to obtain injunctive or other equitable relief with respect to certain actions.
If equitable remedies are found not to be available to stockholders in any
particular case, stockholders may not have an effective remedy against the
challenged conduct.
m. He understands all aspects of and risks associated with this
investment or has consulted with his own financial adviser who has advised him
thereof and he has no further questions with respect thereto.
n. HE UNDERSTANDS THAT THERE WILL BE NO MARKET FOR THE SHARES AND
THAT NONE IS LIKELY TO DEVELOP AND THAT THERE ARE SUBSTANTIAL RESTRICTIONS ON
THE SALE OR OTHER TRANSFERABILITY OF THE SHARES; the Shares will not be, and the
Investor has no right to require, that the Shares be registered under the
Securities Act of 1933 or under any state securities laws; there will be no
public market for the Shares and the undersigned may not be able to avail
himself of the provisions of Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act with respect to the resale of the Shares
and, accordingly, THE INVESTOR MAY HAVE TO HOLD THE SHARES INDEFINITELY AND
POSSIBLY MAY NOT BE ABLE TO LIQUIDATE HIS INVESTMENT OR TRANSFER ANY SHARE
WITHOUT POTENTIAL ADVERSE FINANCIAL CONSEQUENCES; THEREFORE, THE SHARES SHOULD
NOT BE PURCHASED UNLESS THE INVESTOR HAS LIQUID ASSETS SUFFICIENT TO ASSURE THAT
SUCH PURCHASE WILL CAUSE NO UNDUE FINANCIAL DIFFICULTIES AND UNLESS THE INVESTOR
CAN OTHERWISE PROVIDE FOR HIS CURRENT NEEDS AND POSSIBLE PERSONAL CONTINGENCIES.
o. He will not transfer or assign this subscription, the Shares or any
interest therein without the prior written consent of the Company. If this
subscription is accepted, he agrees that the assignment and transferability of
the Shares subscribed for and acquired by him will be governed by all applicable
laws.
p. He understands that the Shares have not been registered under the
Securities Act of 1933 or under any state securities laws on the grounds that
the issuance and sale of the Shares to the Investor is exempt as not involving a
public offering. He further acknowledges his understanding that the Company's
reliance on such exemption is, in part, based upon the representations,
warranties and covenants of the Investor set forth herein.
q. He is knowledgeable and experienced in financial and business
matters. He and/or his financial or business advisers, if any, are capable of
evaluating the merits and risks of an investment in the Shares.
<PAGE>
r. All information which he has provided to the Company concerning his
financial position and knowledge of financial and business matters is correct
and complete as of the date set forth at the end of this Subscription Agreement,
and if there should be any material change in such information prior to
acceptance of this Subscription Agreement by the Company, he will immediately
provide the Company with such information.
s. If he is executing this Subscription Agreement on behalf of a
corporation, partnership, trust or other entity, he has been duly authorized by
such entity to execute this Subscription Agreement and all other instruments in
connection with the purchase of the Shares, his signature is binding upon such
corporation, partnership, trust or other entity and he represents and warrants
that such corporation, partnership, trust or other entity was not organized for
the purpose of acquiring the Shares subscribed for pursuant to this Subscription
Agreement and that the acquisition of the Shares is an authorized investment of
the corporation, partnership, trust or other entity.
4. Anti-Dilution Rights:
The funding obligation of Investor under the Stock Purchase Agreement
entered into between the Investor and the Company dated September ___, 1996 is
hereby terminated. The number of shares of the Company's Common Stock issued to
the Investor hereunder is based upon the Investor's current understanding of the
capitalization of the Company. Notwithstanding anything to the contrary, it is
the understanding of the Investor and the Company that upon the issuance of the
30,447,394 shares to the Investor pursuant to this Subscription Agreement that
the Investor shall own 51% of the outstanding fully diluted equity securities of
the Company. Notwithstanding anything to the contrary, if the capitalization of
the Company is such that the Investor does not own at least 51% of the fully
diluted equity securities of the Company up to a total authorized capital of
100,000,000 shares, then the number of shares issued to the Investor shall be
adjusted so that the Investor shall own at least 51% of the outstanding fully
diluted equity securities of the Company through the issuance of 100,000,000
shares.
5. Responsibility and Indemnification:
The Company will exercise its best judgment in the conduct of all
matters arising under this Subscription Agreement. The undersigned acknowledges
that he understands the meaning and legal consequences of the representations
and warranties contained herein, and he hereby agrees to indemnify and hold
harmless the Company, its officers, directors, shareholders and employees, and
any of their affiliates and their officers, directors, shareholders and
employees, or any professional advisor or entity thereto, from and against any
and all loss, damage, liability or expense, including costs and reasonable
attorney's fees, to which said entities and persons may be put or which they may
incur by reason of, or in connection with, any misrepresentation made by the
Investor, any breach of any of his warranties, or his failure to fulfill any of
his covenants or agreements under this Subscription Agreement.
6. Company Solely Responsible for Disclosure; No Independent Review or
Opinions.
The Company has assumed sole responsibility for compliance with the
disclosure requirements of federal and state securities laws in connection with
the offer and sale of the Shares. No law firm, accounting firm, securities
broker/ dealer or other third party has conducted any due diligence review of
the Company and its business and affairs or any disclosures with respect
thereto, written or oral, made by the Company or others. The Company has agreed
to indemnify and hold harmless its law firm for any claim, loss, damage or
liability incurred as a result of violation of federal or state securities laws
in connection with the disclosure obligations thereof. Notwithstanding the
preparation of any documents or agreements related to the Company or this
investment, the Company's law firm has not rendered any legal opinions
concerning any aspect of the Company's business and affairs, including but not
limited to, the validity or enforceability of any contracts, agreements,
obligations or security interests related to an investment in the Company. By
execution of this Subscription Agreement, the undersigned acknowledges that the
Company is solely responsible for all disclosures to potential Investors
concerning the Company and its business and affairs and that no legal opinions
have been rendered by the Company's law firm as described above. For value
<PAGE>
received, the undersigned does hereby release the Company's law firm and its
officers, directors, shareholders and employees from any claim, loss, liability
or damage with respect to the foregoing.
7. Survival of Representations, Warranties, Covenants and Agreements:
The representations, warranties, covenants and agreements contained
herein shall survive the delivery of, and the payment for, the Shares.
8. Notices:
Any and all notices, designations, consents, offers, acceptances or
any other communication provided for herein shall be given in writing by
registered or certified mail which shall be addressed to, in the case of the
Company, [Swiss American Capital Management, Inc.]; and in the case of the
Investor, to the address set forth in this Subscription Agreement or otherwise
appearing on the books of the Company or his residence or to such other address
as may be designated by him in writing.
9. Miscellaneous:
This Subscription Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware, both substantive
and remedial. The section headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Subscription Agreement. This Subscription Agreement shall be enforceable in
accordance with its terms and be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, assigns, executors and
administrators, but this Subscription Agreement and the respective rights and
obligations of the parties hereunder shall not be assignable by any party hereto
without the prior written consent of the other. This Subscription Agreement
represents the entire understanding and agreement between the parties hereto
with respect to the subject matter hereof; supersedes all prior negotiations,
letters and understandings relating to the subject matter hereof; and cannot be
amended, supplemented or modified except by an instrument in writing signed by
the party against whom enforcement of any such amendment, supplement or
modification is sought. In the event of any litigation between the parties to
this Subscription Agreement relating to, or arising out of, this Subscription
Agreement, the prevailing party shall be entitled to an award of reasonable
attorney's fees and costs, whether incurred before, during or after trial or at
the appellate level. The failure or finding of invalidity of any provision of
this Subscription Agreement shall in no manner affect the right to enforce the
other provisions of same, and the waiver by any party of any breach of any
provision of this Subscription Agreement shall not be construed to be a waiver
by such party of any subsequent breach of any other provision.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement this 29th day of April, 1997.
KILGARVAN INVESTMENT &
HOLDING COMPANY, LIMITED
/s/ Dr. F. Kunzli
Print Name: Dr. F. Kunzli
Title: Director
/s/ P. Seeholzer
Print Name: P. Seeholzer
Title: Director
SUBSCRIPTION ACCEPTED:
(DE) U.S. ENVIRONMENTAL, INC.,
a Delaware corporation
By: /s/ Max Schmid
Print Name: Max Schmid, President
Exhibit 2
MANAGEMENT AGREEMENT
THIS AGREEMENT made as of this 18th day of April, 1997, between (DEL) U.S.
Environmental, Inc., a Delaware corporation, hereinafter called "Company", and
Swiss American Capital Management, Inc., a Florida corporation qualified to do
business in Florida ("Manager").
WHEREAS, Manager shall operate the business and affairs of the Company for
the benefit of the Shareholders; and
WHEREAS, Manager has the expertise to provide the services offered by the
Company on behalf of the Shareholders;
WHEREAS, Company desires to engage Manager to manage the operation of the
business and Manager desires to accept such engagement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, Company and Manager agree as follows:
1. Employment of Manager. Owner hereby appoints Manager and Manager hereby
accepts the appointment as manager to provide the Services.
2. Term. The services of Manager shall commence upon the date of this
Agreement, and shall continue until terminated as provided under Paragraph 7.
The terms of this Agreement are contemplated to and shall survive the date of
termination of Manager's services hereunder.
3. Manager's Duties - General. From the effective date of this Agreement
until the date of its termination, Manager shall be responsible for all
operations, regulatory compliance, sales and marketing provided by the Company.
The determination of Manager as to amounts to be expended for such purposes
shall be final and Company will make available to Manager all monies deemed
necessary by Company for Manager to fulfill its responsibilities under this
Agreement.
4. Specific Duties of Manager. During the period of this Agreement, Manager
shall use its best efforts in the management and operation of the business of
the Company so that the Company will be operated and maintained in a first
quality manner.
a. Submit before the beginning of each operating year and before the
same date of each year thereafter an estimated profit and loss statement for the
ensuing operating year, including a schedule of revenues and budget estimates in
detail for repairs, maintenance, replacements, promotional and marketing
efforts, and capital expenditures for each ensuing year. (All budget estimates
are hereinafter referred to collectively as the "Annual Plan.")
b. Establish and supervise accounting functions, with appropriate
accounting and cost control systems. Manager shall cause to be prepared and
filed all necessary reports with respect to withholding taxes, social security
taxes, unemployment insurance, disability insurance, the Fair Labor Standards
Act, and all other statements and reports pertaining to labor employed on
Company's payroll in or about the Properties, if any.
c. Make available to Company, the services of Manager's specialized
expertise through duly licensed and competent personnel which would be useful in
the performance of Manager's specific responsibilities hereunder, including its
operation of the Company in conformity with all SEC rules and regulations for
the operation of a publicly held corporation.
d. Arrange for compliance with all statutes, ordinances, laws, rules,
regulations, orders, and determinations affecting or issued in connection with
the business of Company.
<PAGE>
5. Manager's Compensation During Operating Period. As compensation for the
services to be rendered by Manager, Company will pay to Manager on each monthly
anniversary date of this Agreement a sum to be mutually agreed upon by Company
and Manager. Company shall be responsible for all expenses which Manager incurs
in performing its duties hereunder and will make monies available to Manager on
a timely basis. Notwithstanding any other provision hereof, Manager shall be
entitled to additional reasonable compensation for services rendered to Company
at Company's request and not specified as Manager's responsibility under this
Agreement, including without limitation and by way of example the supervising of
attorneys and other professionals hired to represent Company's interests.
6. Insurance.
a. Manager shall maintain insurance of such kinds and amounts as
Company shall be required to carry pursuant, as well as any other insurance that
Company or any governmental entity shall require.
b. Periodically, Manager shall furnish Company with a schedule setting
forth the kinds and amounts of insurance then in force and the names of the
insurers, and also setting forth such additional kinds and amounts of insurance
as Manager then intends to procure. Promptly following the submission of each
such schedule, Company shall notify Manager of any change in the kinds and
amounts of insurance then in force or intended to be procured by Manager which
Company shall elect to make and Manager shall forthwith apply for and obtain, if
obtainable, endorsements to reflect any such change in the insurance then in
force and such additional kinds and amounts of insurance as Company designates.
All such additional insurance shall be obtained from such companies and through
such brokers as Company shall direct.
c. All policies of insurance shall name as the insureds thereunder
Company, Manager and such other parties as may be required by the provisions of
any mortgage, as their respective interests may appear. All policies of hazard
insurance shall include loss payment clauses in the form required by any
mortgage or lease. All insurance shall be obtained at Company's expense. The
originals of all policies of insurance and duplicates thereof shall be delivered
to Owner and to the holder of any mortgage as Company shall direct.
d. Provided Manager shall procure and keep in force all of the
procurable insurance required to be obtained by Manager pursuant to the
foregoing provisions of this Paragraph 6, neither Company nor Manager shall
assert against the other any claims for losses, damages, liability, or expenses
(including attorneys' fees) incurred or sustained by either of them, to the
extent that the same are covered by such insurance, on account of damage or
injury to person or property arising out of the ownership, operation, or
maintenance of the Properties. To the extent that the same exceed the amount
covered by such insurance, such excess shall be paid by Company.
e. Company and Manager shall each give prompt notice to the other of
any claims made against either of them in connection with the Company and shall
cooperate fully with each other and with any insurance carrier to the end that
all such claims will be properly investigated and defended. Manager shall not
hire any attorneys to defend any such claim against Company without Company's
consent.
7. Termination of Agreement. This Agreement and the employment of Manager
shall be terminated and, except as to liabilities or claims which shall have
accrued or arisen prior to such termination, all obligations hereunder shall
cease upon the happening of any of the following events:
a. If there shall be filed by Manager or Company in any court pursuant
to any statute either of the United States or of any state a petition in
bankruptcy or insolvency, or for a reorganization, or for the appointment of a
receiver or trustee of all or a substantial portion of its property, or if
Manager or Company makes an assignment for or petitions for or enters into an
arrangement for the benefit of creditors, or if a petition in bankruptcy is
filed against Manager which is not discharged within ninety (90) days
thereafter.
b. The giving of notice by Manager that it has elected, for any reason
whatsoever, not to provide the services of Manager for the operations of the
Company.
<PAGE>
c. Upon the giving of written notice by either party to the other of
its election to terminate this Agreement, which termination shall be effective
upon appointment by Company of a successor manager for the Company, but in any
event no later than thirty (30) days after the giving of such notice.
d. The occurrence of a default hereunder on the part of any party, if
written notice of such default is given to the defaulting party and such default
is not cured within a reasonable time thereafter, not to exceed thirty (30)
days.
8. Prohibition of Assignment. Manager shall not assign this Agreement or
any of its rights hereunder; nor shall this Agreement or any of Manager's rights
or obligations hereunder be transferable on Manager's part by operation of law
or otherwise, except by merger or consolidation with another entity if the
operating personnel of the surviving entity at the time of such merger or
consolidation shall be substantially the same as the operating personnel of
Manager.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed on the day and year first above written.
WITNESSES: COMPANY:
(DEL) U.S. ENVIRONMENTAL, INC., a
Delaware corporation
/s/ Deborah Pease By: /s/ Max P. Schmid
Print Name: Deborah Pease Its: President
MANAGER:
SWISS AMERICAN CAPITAL
MANAGEMENT, INC., a Florida Corp.
/s/ Deborah Pease By: /s/ Thomas P. Dolan
Print Name: Deborah Pease Its: President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 149,825
<SECURITIES> 0
<RECEIVABLES> 5,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 210,325
<PP&E> 252,319
<DEPRECIATION> 10,311
<TOTAL-ASSETS> 2,661,761
<CURRENT-LIABILITIES> 338,908
<BONDS> 0
0
0
<COMMON> 7,669
<OTHER-SE> 5,732,894
<TOTAL-LIABILITY-AND-EQUITY> 2,661,761
<SALES> 5,000
<TOTAL-REVENUES> 5,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 462,711
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,294)
<INCOME-PRETAX> (461,005)
<INCOME-TAX> 0
<INCOME-CONTINUING> (461,005)
<DISCONTINUED> 0
<EXTRAORDINARY> 197,548
<CHANGES> 0
<NET-INCOME> (263,457)
<EPS-PRIMARY> (.005)
<EPS-DILUTED> (.005)
</TABLE>
