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, 1996
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[ ] 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
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
8130 66th Street North, Suite 6, Pinellas Park, Florida 33781
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(Address of Principal Executive Offices)
(727) 548-4300
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(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 December 31, 1996 was 45,891,909.
Transitional Small Business Disclosure Format:
Yes No X
--- ---
<PAGE>
(DEL) U.S. ENVIRONMENTAL, INC. AND SUBSIDIARY
Index
Page
----
Part I - Financial Information
- ------------------------------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -
December 31, 1996 and September 30, 1996.................. 1
Consolidated Statements of Operations -
Three months ended December 31, 1996 and 1995............. 2
Notes to Consolidated Financial Statements.................. 3
Part II - Other Information
- ---------------------------
Item 1. Legal Proceedings............................................ 4
Signatures.................................................. 4
i
<PAGE>
(DEL) U.S. ENVIRONMENTAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
----------------- ----------------
----------------- ----------------
(unaudited)
<S> <C> <C>
Assets
Current assets
Cash $ 44,715 $ 351,713
Prepaid expenses 55,500 5,500
----------------- ----------------
----------------- ----------------
Total current assets 100,215 357,213
----------------- ----------------
----------------- ----------------
Property and equipment 252,319 478
Less accumulated depreciation 5,971 372
----------------- ----------------
----------------- ----------------
246,348 106
----------------- ----------------
----------------- ----------------
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 2,555,991 2,566,747
================= ================
================= ================
Liabilities and Stockholders' Equity
Current liabilities
Notes payable:
Shareholders 62,833 92,833
Others 23,938 148,000
Accounts payable & accrued expenses 317,829 370,210
Current portion of notes payable and long-term debt 24,000 -
Accrued interest - -
----------------- ----------------
----------------- ----------------
Total current liabilities 428,600 611,043
----------------- ----------------
----------------- ----------------
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 548,600 611,043
----------------- ----------------
----------------- ----------------
Stockholders' equity
Common stock, par value $.0001
Authorized 100,000,000 shares,
45,891,909 and 43,891,909 issued and outstanding, respectively 4,589 4,389
Additional paid-in capital 5,375,368 5,225,568
Deficit accumulated during the development stage (3,372,566) (3,274,253)
----------------- ----------------
----------------- ----------------
Total stockholders' equity 2,007,391 1,955,704
----------------- ----------------
----------------- ----------------
Total liabilities and stockholders' equity $ 2,555,991 $ 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 (Inception) to
--------------------------------- -------------------
December 31, December 31, December 31,
1996 1995 1996
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(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Revenue from demonstration fees $ - $ - $ 275,000
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Development stage expenses
Research and development - - 169,020
General and administrative 92,715 17,400 2,109,322
Depreciation and amortization 5,598 89,145 1,404,341
------------- ------------- -------------------
Total development stage expenses 98,313 106,545 3,682,683
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Net development stage expenses 98,313 106,545 3,407,683
------------- ------------- -------------------
Other income (expense)
Interest expense - - -
Interest income - - 1,429
Miscellaneous income - - 5
Loss on impairment of assets - - (2,388)
------------- ------------- -------------------
Total other income (expense) - - (954)
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Net loss before income taxes and
extraordinary gain (98,313) (106,545) (3,408,637)
Income taxes
Deferred income tax benefit - - -
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Net loss before extraordinary gain (98,313) (106,545) (3,408,637)
Extraordinary gains
Extraordinary gain on forgiveness of debt - - 36,071
------------- ------------- -------------------
Net loss $ (98,313) $ (106,545) $ (3,372,566)
============= ============= ===================
Loss per common share
Loss before extraordinary gain - - (0.13)
Extraordinary gain on forgiveness of debt - - 0.001
Net loss per common share $ (0.002) $ (0.003) $ (0.13)
============= ============= ===================
Weighted average number of
common shares outstanding 44,780,798 34,435,163 25,357,621
============= ============= ===================
</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 ended December 31, 1996 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 November 1996 the Company pursuant to Regulation S issued 2,000,000 shares of
Company Common Stock to Commodity Trade, Ltd., Gibraltar, a foreign outside
investor for $150,000. The proceeds of this transaction were allocated towards
the purchase of EFIC's interest in the demonstration facility at Niagara Falls,
New York as part of the bankruptcy proceedings against EFIC. As part of the
acquisition the Company also prepaid a three-year lease for the exclusive use of
the building housing the demonstration facility.
3
<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
Form 8K, dated November 20, 1996 is incorporated herein by reference.
Exhibit 1. Regulation S Investor Representation and Subscription
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
4
<PAGE>
Exhibit 1
REGULATION S INVESTOR REPRESENTATION
AND SUBSCRIPTION AGREEMENT
U.S. Environmental, Inc.
630 Parkview Tower
First Avenue
King of Prussia, PA 19406
Gentlemen:
1. Subscription. The undersigned subscriber (the "Purchaser") hereby irrevocably
subscribes for and agrees to purchase 2,000,000 shares of U.S. Environmental,
Inc., a Delaware corporation (the "Company"), Common Stock, par value $.0001 in
accordance with the terms hereof in consideration of $150,000.
2. Representation and Warranties. The Purchaser hereby acknowledges, represents
and warrants to and agrees with the Company as follows:
(a) The Purchaser represents and warrants that it is not (1) a U.S. person
(as defined in Rule 902(o) of Regulation S) or as set forth in Schedule "A"
attached hereto).
(b) The Purchaser acknowledges that the offer and sale of the Shares is not
taking place within the United States, but rather in an offshore transaction.
"United States" means the United States of America, its territories and
possessions, and any state of the United States, and the District of Columbia.
At the time the buy order for the Shares was originated, the Purchaser was
outside the United States and is outside the United States as of the date of the
execution and delivery of this agreement.
(c) The Purchaser acknowledges its understanding that the offer and sale of
the Shares intended to be exempt from registration under the Securities Act of
1933, as amended (the "Act"), by virtue of Regulation "S" promulgated
thereunder.
(d) The Purchaser acknowledges that the Shares have not been registered
under the Act and, therefore, cannot be offered or sold in the United States or
to U.S. persons for a period of a minimum of 40 days from the sale of
securities, unless the Shares are registered under the Act, or an exemption from
the registration requirements of the Act is available.
(e) The Purchaser represents and warrants that if the certificate(s) is
requested by the Purchaser to be issued in the name of a nominee, each and every
beneficiary for which said certificate(s) is held by the nominee will be
non-U.S. persons, as defined in Rule 902(o) of Regulation S. The Purchaser
acknowledges that this Agreement and any certificate representing the Shares
issued under this Agreement shall bear the restrictive legend set forth in
Paragraph 2(j) of this Subscription Agreement. The Purchaser further
<PAGE>
acknowledges that the Company will effect a conveyance only in accordance with
the regulations of Regulation S; the Company further agrees, subject to
Regulation S, that upon lapse of the date inserted in the legends as described
in Paragraph 2(j), the Company will, upon request of the Purchaser, reissue the
certificate(s) within forty eight (48) hours, deleting said restrictive legend
and any other encumbrances.
(f) The Purchaser is not purchasing the Shares with the present intention
of "distributing" the Shares on behalf of the Company or a "distributor" as
defined in Regulation S, or any of the affiliates in the United States or to a
U.S. person.
(g) The Purchaser represents and warrants and hereby agrees that all offers
and sales of the Shares by the Purchaser in the United States or to a U.S.
person or otherwise shall be made only pursuant to our registration of the
Shares, under the Act or an exemption from registration.
(h) The Purchaser acknowledges that the Shares cannot be sold by it in the
United States as part of a "distribution" plan as such term is defined in the
Federal Securities Laws of the United States.
(i) The Purchaser is not a "distributor" as defined in Regulation S. No
"distributor" has been relied upon by the Purchaser to facilitate its purchaser
of the Shares.
(j) The Purchase acknowledges that this Subscription Agreement and any
certificate representing the Shares issued pursuant to this Subscription
Agreement shall bear the following restrictive legend and stop-transfer
instructions will be issued to any transfer agent of such Shares to insure
compliance with the provisions of Regulation S and the Securities Act:
"These Shares have been issued subject to Regulation "S" as an exemption to
the registration provisions under the Securities Act of 1933, as amended. These
Shares cannot be transferred, offered or sold in the United States or to U.S.
Persons (as defined in Regulation "S") until after __________, 199 _, (40 days
from the Closing Date)."
(k) The Purchaser has executed this Subscription Agreement outside of the
United States.
(l) The Purchaser's name and place of business is as follows:
Commodity Trade, Ltd.
c/o Turicum Private Bank
Turicum House
315 Main Street
P.O. Box 619
Gibraltar
<PAGE>
IN WITNESS WHEREOF, the Purchaser has executed this Subscription
Agreement on this __________, day of ________________, l99 _ .
Commodity Trade, Ltd.
c/o Turicum Private Bank
Turicum House
315 Main Street
P.O. Box 619
Gibraltar
---------------------
(Signature and Title)
ACCEPTED BY:
U.S. ENVIRONMENTAL, INC.
By: /s/ Thomas R. Tate
Title: President
Dated: November 20, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 44,715
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 100,215
<PP&E> 252,319
<DEPRECIATION> 5,971
<TOTAL-ASSETS> 2,555,991
<CURRENT-LIABILITIES> 428,600
<BONDS> 0
0
0
<COMMON> 4,589
<OTHER-SE> 5,375,368
<TOTAL-LIABILITY-AND-EQUITY> 2,555,991
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 98,313
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (98,313)
<INCOME-TAX> 0
<INCOME-CONTINUING> (98,313)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (98,313)
<EPS-PRIMARY> (.002)
<EPS-DILUTED> (.002)
</TABLE>
