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, 1998
[ ] 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
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(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
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The number of shares outstanding of the Issuer's Common Stock, $.0001 Par
Value, as of December 31, 1998 was 1,867,175.(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
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Part I - Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -
December 31, 1998 ............................. 3
Consolidated Statements of Operations -
Three months ended December 31, 1998 and 1997 ................... 4
Consolidated Statements of Cash Flows -
Three months ended December 31, 1998 and 1997.................. 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)
12/31/98
Assets
Current Assets
Cash $43
Prepaid Expenses 18,056
-------
Total Current Assets 18,099
Property and equipment, net of accumulated depreciation 215,183
-------
Other Assets
License, net of accumulated amortization 572,654
-------
Total Assets $805,936
========
Liabilities and Stockholders' Equity
Accounts payable & accrued expenses $187,569
Current portion of notes payable and long-term debt 199,619
Accrued interest 91,580
-------
Total current liabilities 478,768
-------
Long -term debt, net of current maturities
Notes payable, net of current maturities 18,000
-------
Stockholders' equity
Common stock, par value $.0001 187
100,000,000 shares authorized, 1,867,175
shares issued and outstanding
Additional paid-in capital 6,419,837
Deficit accumulated during the development stage (6,110,856)
----------
Total stockholders' equity 309,168
-------
Total liabilities and stockholders' equity $805,936
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(DEL) U.S. ENVIRONMENTAL, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE ENTERPRISE
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
3 mos ending 3 mos ending INCEPTION
12/31/98 12/31/97 2/18/88
12/31/98
Revenue from demonstration fees - - $280,000
-------- --------- ---------
Development stage expenses
Research and development - 169,020
General and administrative $88,891 $130,943 3,276,883
Depreciation and amortization 11,749 1,731,397
-------- --------- ---------
Total development stage expenses 100,640 130,943 5,177,300
Net development stage expenses 100,640 130,943 4,897,300
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 (100,640) 130,943 (6,399,708)
Income taxes - -
tax benefit - - 112,700
-------- --------- ---------
Net loss before extraordinary gain (100,640) 130,943 (6,287,008)
Extraordinary gains
Extraordinary gain on forgiveness
of debt - - 176,152
-------- --------- ---------
Net loss (100,640) 103,943 (6,110,856)
Loss per common share
Loss before extraordinary gain - - ($19.85)
Extraordinary gain on forgiveness of debt - - .55
Net loss per common share (.05) (.12) ($19.30)
Weighted average number of common
shares outstanding 1,858,934 820,767 316,573
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(DEL) U.S. ENVIRONMENTAL, INC. AND SUBSIDIARY
A DEVELOPMENT STAGE ENTERPRISE
CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED)
3 mos ending 3 mos ending INCEPTION
12/31/98 12/31/97 2/18/88
12/31/98
Cash flow from operating activities:
net loss ($100,640) $130,943 (6,110,856)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 11,749 - 1,731,397
Extraordinary gain on forgiveness
of debt (176,152)
Deferred income tax benefit - - (112,700)
Loss on impairment of assets - - 1,345,773
Issuance of common stock for services 27,700 - 844,258
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 61,161 119,309 681,117
------- ------- --------
Net cash used in operating activities 30 11,634 (1,573,079)
------- ------- --------
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)
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Cash flows from financing activities
Proceeds from issuance of notes payable - - 125,219
Principal payments on notes payable - 131,127 (41,225)
Issuance of common stock, net of
offering costs - 125,127 1,596,771
Proceeds from issuance of
convertible notes - - 199,000
------- ------- --------
Net cash provided by financing
activities - 6,000 1,879,765
------- ------- --------
Net increase (decrease) in cash (30) 17,634 43
Cash beginning 73 18,179 0
------- ------- --------
Cash ending $43 $545 $43
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(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 months ended December 31, 1998 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 OF COMMON STOCK
On November 13, 1998 the following issuances were made:
250,000 shares of common stock were issued at $.02 per share to Couture &
Company as compensation for outstanding accounting fees.
1,266,667 shares of common stock were issued at $.015 per share to Sweeney
& Sheehan as compensation for outstanding legal fees.
246,667 shares of common stock were issued at $.015 per share to Palmerella
& Sweeney as compensation for outstanding legal fees.
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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 November 13, 1998 the following issuances were made:
250,000 shares of common stock were issued at $.02 per share to Couture &
Company as compensation for outstanding accounting fees.
1,266,667 shares of common stock were issued at $.015 per share to Sweeney &
Sheehan as compensation for outstanding legal fees.
246,667 shares of common stock were issued at $.015 per share to Palmerella &
Sweeney as compensation for outstanding legal fees.
All of the above 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
On December 18, 1998, a one-for-one hundred reverse stock split, and an
increase in the number of authorized shares after such reverse stock split
(which had reduced the authorized shares to 2,000,000) to 100,000,000, were
approved by written consent of shareholders owning a majority of the common
stock of Registrant.
Item 5. Other Information
None
Item 6. Exhibits and reports on Form 8K
None
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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
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Belinda J. Jarrett
Treasurer and
Principal Accounting Officer
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