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 March 31, 1999
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to __________
Commission File Number 0-17963
(DEL) 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.)
8200 State Avenue Kansas City, Kansas 66112
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(Address of Principal Executive Offices)
(913) 788-5200
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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 March 31, 1999 was 1,970,831 (adjusted for 100: 1 reverse stock
split).
Transitional Small Business Disclosure Format: Yes No X
--- ---
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(DEL) U.S. ENVIRONMENTAL, INC. AND SUBSIDIARY
Index
Page
----
Part I - Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -
March 31, 1999 and September 30, 1998.......................... 3
Consolidated Statements of Operations -
Three months and six months ended March 31, 1999 and 1998...... 4
Consolidated Statements of Cash Flows -
Six months ended March 31, 1999 and 1998....................... 5
Notes to Consolidated Financial Statements....................... 6
Item 2. Management's Discussion and Analysis or Plan of Operation........ 7
Part II - Other Information
Item 1. Legal Proceedings................................................. 7
Item 2. Changes in Securities............................................. 7
Item 3. Defaults Upon Senior Securities................................... 7
Item 4. Submission of Matters to a Vote of Security Holders............... 7
Item 5. Other Information................................................. 7
Item 6. Exhibits and reports on Form 8K
Signatures....................................................... 7
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(DEL) U.S. ENVIRONMENTAL, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE ENTERPRISE
CONSOLIDATED BALANCE SHEET (UNAUDITED)
3/31/99
-------
Assets
Current Assets
Cash $3,280
Prepaid Expenses 18,056
-------
Total Current Assets 21,336
-------
Property and equipment, net of accumulated depreciation 211,017
Other Assets
License, net of accumulated amortization 565,154
-------
Total Assets $797,507
=======
Liabilities and Stockholders' Equity
Accounts payable & accrued expenses $152,421
Current portion of notes payable and long-term debt 199,619
Accrued interest 91,580
-------
Total current liabilities 443,620
Long -term debt, net of current maturities
Notes payable, net of current maturities 85,120
Stockholders' equity
Common stock, par value $.0001 197
100,000,000 shares authorized
1,970,831 shares issued and outstanding
respectively
Additional paid-in capital 6,420,861
Deficit accumulated during the development stage (6,152,291)
---------
Total stockholders' equity 268,767
---------
Total liabilities and stockholders' equity $797,507
=======
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(DEL) U.S. ENVIRONMENTAL, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE ENTERPRISE
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C> <C>
3 MOS ENDED SIX MOS ENDED INCEPTION TO DATE
8/18/88 to
3/31/99
3/31/99 3/31/98 3/31/99 3/31/98
-------- -------- -------- --------- -----------------
Revenue from demonstration fees - $280,000
Development stage expenses
Research and development - 169,020
General and administrative 29,769 185,884 118,660 316,827 3,306,652
Depreciation and amortization 11,666 0 23,415 0 1,743,063
-------- -------- -------- --------- -----------------
Total development stage expenses 41,435 185,884 142,075 316,827 5,218,735
-------- -------- -------- --------- -----------------
Net development stage expenses 41,435 185,884 142,075 316,827 4,938,735
-------- -------- -------- --------- -----------------
Other income (expense)
Interest expense - (161,297)
Interest income - 2,162
Miscellaneous income - 2,500
Loss on impairment of assets - (1,345,773)
-------- -------- -------- --------- -----------------
Total other income (expense) - (1,502,408)
-------- -------- -------- --------- -----------------
Net loss before income taxes and
extraordinary gain (41,435) (185,884) (142,075) (316,827) (6,441,143)
Income taxes
Deferred income tax benefit - 112,700
Net loss before extraordinary gain (6,328,443)
Extraordinary gains
Extraordinary gain on
forgiveness of debt - 176,152
-------- -------- -------- --------- -----------------
Net loss (41,435) 185,884 (142,075) (316,827) (6,152,291)
======== ======== ======== ========= =================
Loss per common share
Loss before extraordinary gain (18.79)
Extraordinary gain on
forgiveness of debt - .52
Net loss per common share (0.02) (0.22) (0.07) (0.38) (18.27)
Weighted average number of
common shares outstanding 1,931,482 861,625 1,931,482 840,880 336,667
</TABLE>
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(DEL) U.S. ENVIRONMENTAL, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE ENTERPRISE
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
SIX MONTHS ENDED INCEPTION TO DATE
8/18/88
3/31/99 3/31/98 3/31/99
-------- -------- ----------
Cash flow from operating activities:
net loss $(142,075) $316,827 $(6,152,291)
-------- -------- ----------
Adjustments to reconcile net loss to
net cash used in operating
activities
Depreciation and amortization 23,415 1,743,063
Extraordinary gain on forgiveness of deb (176,152)
Deferred income tax benefit (112,700)
Loss on impairment of assets 28,734 1,345,773
Issuance of common stock for services 845,292
Issuance of common stock for
termination of intermediary agreement 240,000
(Increase) decrease in prepaid expenses (15,916)
Increase (decrease) in accounts payable
and accrued expenses 26,013 221,343 645,969
-------- -------- ----------
Net cash used in operating activities (63,913) (95,484) 1,636,962
Cash flows from investing activities
Acquisition of property and equipment (260,786)
Acquisition of patents (44,327)
Acquisition of marketable securities (1,530)
-------- -------- ----------
Net cash used in investing activities (306,643)
Cash flows from financing activities
Proceeds from issuance of notes
payable 67,120 192,339
Principal payments on notes payable (135,127) (41,225)
Issuance of common stock, net of
offering costs 212,824 1,596,771
Proceeds from issuance of
convertible notes 199,000
-------- -------- ----------
Net cash provided by financing activities 67,120 77,697 1,946,885
Net increase (decrease) in cash 3,207 (17,787) 3,280
-------- -------- ----------
Cash beginning 73 18,179 0
-------- -------- ----------
Cash ending $3,280 $392 $3,280
======== ======== ==========
</TABLE>
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, 1998 of U.S Environmental, Inc. (the "Company"), as filed
with the Securities and Exchange Commission. See Disclosure of the Ven
Agreement as set forth in Form 10-KSB.
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 and six months ended March 31, 1999 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.
NOTES RE ISSUANCE
On February 4, 1999 10,335,000 shares of common stock were issued at par
value to Capital One as compensation for finders fees.
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<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
---------------------------------------------------------
Due to the late filing of this Form 10-QSB, the Management's Discussion and
Analysis or Plan of Operation section of the Form 10-KSB of the Registrant
filed on August 13, 1999 is incorporated herein by reference.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is plaintiff in a pending litigation identified as (DEL) U.S.
Environmental, Inc. v. Geotech Development Corporation (Geotech) and Thomas
B. West and Thomas R. Tate and Thomas W. West and Philomena A. Dietrich,
Civil Action 97-6339, in the United States District Court for the Eastern
District of Pennsylvania.
The Company seeks adjudication with respect to whether Geotech has a
partial ownership interest in the Niagara Falls demonstration facility, the
validity of certain cash and stock payments to certain former controlling
persons of the company between 1990 and 1997 and certain infringements of
various articles of the "Technology License Agreement" of October 13, 1989
and its subsequent amendments. Geotech has a counterclaim pending to be
adjudicated owner of fifty percent of the facility.
The litigation is currently in a state of discovery and negotiations.
Item 2. Changes in Securities
On February 4, 1999 10,335,000 shares of common stock were issued at par
value ($.0001) to Capital One as compensation for finders fees. Such shares
were issued pursuant to the exemption provided by Section 4(2) of Regulation
D of the Securities Act.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
An information statement concerning a transaction with Virtual Empowerment
Network, Inc. and the approval by consent of shareholders owning a majority
of the outstanding shares of Registrant on December 18, 1998, was distributed
to the shareholders of record of Registrant as of February 4, 1999.
Item 5. Other Information
None
Item 6. Exhibits and reports on Form 8K
A report on Form 8-K was filed on February 19, 1999 with respect to Item 5
Other Events regarding the agreement with Virtual Empowerment Network, Inc.
(VEN) a Kansas corporation.
<PAGE>
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.
(DEL) U.S. Environmental, Inc.
Dated : August 30 1999
-----------------------------
Thomas P. Dolan
Chief Operating Officer
-----------------------------
Belinda J. Jarrett
Treasurer and
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000844010
<NAME> (DEL) U.S. ENVIRONMENTAL, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-30-1999
<CASH> 3,280
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,056
<PP&E> 211,017
<DEPRECIATION> 11,666
<TOTAL-ASSETS> 797,507
<CURRENT-LIABILITIES> 443,620
<BONDS> 0
0
0
<COMMON> 197
<OTHER-SE> 268,570
<TOTAL-LIABILITY-AND-EQUITY> 797,507
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> (142,075)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (142,075)
<INCOME-TAX> 0
<INCOME-CONTINUING> (142,075)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (142,075)
<EPS-BASIC> (.07)
<EPS-DILUTED> (.07)
</TABLE>
