UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1996.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______ to _________
Commission File Number: 0-26284
U.S. OPPORTUNITY SEARCH, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-309811
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
44 Kean Road, Short Hills, New Jersey 07078
(Address of principal executive offices) (Zip code)
(201) 379-3171
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [_]
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date
As of July 26, 1996 the Registrant had a total of 4,550,000 outstanding
shares of Common Stock, par value, $.001 per share
<PAGE>
U.S. Opportunity Search, Inc.
Index to quarterly Report on Form 10-QSB
Filed with the Securities and Exchange Commission
for the Six Months Ended June 30, 1996
Page Number
Part I. Financial Information...................................... 3
Item 1: Financial Statements (unaudited)........................... 3
Consolidated balance sheets as of June 30, 1996 and
December 31, 1995.......................................... 3
Consolidated statements of operations for the three months
and six months ended June 30, 1996 and 1995................ 4
Consolidated statements of cash flows for the three months
ended June 30, 1996 and 1995............................... 5
Consolidate statement of changes in stockholder equity for
the year ended December 31, 1995 and the six months ended
June 30, 1996.............................................. 6
Notes to Financial Statements.............................. 7
Item 2: Management's Discussion and Analysis or Plan of Operation.. 9
PART II Other Information.......................................... 11
SIGNATURES ........................................................... 12
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
U. S. Opportunity Search, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(unaudited)
June 30, December 31,
ASSETS 1996 1995
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 1,670,115 $ 2,331,639
Accounts receivable 8,808 5,759
Inventories 104,746 92,346
Prepaid other assets 25,884 5,178
----------- -----------
Total current assets 1,809,553 2,434,922
Property and equipment, net 174,761 74,178
Patents 2,154,588 2,269,360
Other assets 4,638 1,500
----------- -----------
Total assets $ 4,143,540 $ 4,779,960
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 45,934 $ 54,320
Accrued Expenses 10,662 29,561
----------- -----------
Total current liabilities 56,596 83,881
----------- -----------
MINORITY INTEREST 86,225 177,568
STOCKHOLDERS' EQUITY
Common stock, par value $.001; authorized,
10,000,000 shares; issued and outstanding,
4,550,000 shares 4,550 4,480
Additional paid-in Capital 5,690,825 5,690,895
Deficit (1,434,618) (786,824)
Unearned Compensation (260,040) (390,040)
----------- -----------
Total stockholders' equity 4,086,944 4,518,511
----------- -----------
Total liabilities and stockholder's equity $ 4,143,540 $ 4,779,960
=========== ===========
3
<PAGE>
U.S. Opportunity Search, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For the six months ended June 30,
(unaudited)55
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30 June 30
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 107,385 $ 33,027 $ --
Cost of sales 73,028 20,502 --
----------- ----------- ----------- -----------
Gross profit 34,357 -- 12,525 --
----------- ----------- ----------- -----------
Selling, general and
administrative expense 840,259 253,500 424,070 140,011
Research and development
expense 63,773 25,975
----------- ----------- ----------- -----------
Loss from operations (869,675) (253,500) (437,520) (140,011)
----------- ----------- ----------- -----------
Other income and expense
Interest income 42,711 18,952 18,997 10,102
Other income 72,926 65,000
Minority interest in net loss of
subsidiaries 106,246 39,173
----------- ----------- ----------- -----------
NET LOSS $ (647,792) $ (234,548) $ (314,350) $ (129,909)
=========== =========== =========== ===========
Loss per share $ (0.14) $ (0.08) $ (0.07) $ (0.05)
Weighted average shares
outstanding 4,503,000 2,850,000 4,550,000 2,850,000
</TABLE>
4
<PAGE>
U.S. Opportunity Search, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30 June 30
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net loss $ (647,792) $ (234,548) $ (314,350) $ (129,909)
Adjustment to reconcile net loss to net cash
used in operating activities
Amortization of excess of purchase price
over tangible net assets 114,772 -- 57,387 --
Amortization and depreciation 1,894 19,512 947 --
Loss applicable to minority interest (91,346) -- (24,273) --
Compensation expense 130,000 -- 65,000 --
Changes in assets and liabilities
(Increase) in other assets (3,138) (213) -- (89,509)
(Increase) in accounts receivable (3,049) -- 7,244 --
(Increase) in inventories (12,400) -- (2,538) --
Decrease in prepaid other assets (20,706) -- (21,633) --
Increase in accounts payable (8,386) -- (45,561) --
(Decrease) increase in accrued expenses (18,896) 12,494 (8,892) 4,783
Increase in loans receivable -- (107,584) --
----------- ----------- ----------- -----------
Net cash used in operating activities (559,047) (310,339) (286,669) (214,635)
----------- ----------- ----------- -----------
Cash flows from investing activities
Capital expenditures (102,477) -- (18,502) --
----------- ----------- ----------- -----------
Net cash used in investing activities (102,477) -- (18,502) --
----------- ----------- ----------- -----------
Cash flows from financing activities
Net proceeds form issuance of common stock 58 --
Paid in capital 65,777 --
Offering costs (5,609) --
Proceeds from issuance of debt 439,202 264,239
(Repay) Loans from stockholders (45,484) (55,598)
Deferred offering costs (59,865) -- --
----------- ----------- ----------- -----------
Net cash provided by financing activities -- 394,079 -- 208,641
----------- ----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (661,524) 83,740 (305,171) (5,994)
Cash and cash equivalents at beginning of year 2,331,639 13,920 1,975,286 103,654
----------- ----------- ----------- -----------
Cash and cash equivalents at end of year $ 1,670,115 $ 97,660 $ 1,670,115 $ 97,660
=========== =========== =========== ===========
</TABLE>
5
<PAGE>
U.S. Opportunity Search, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER EQUITY
For the year ended December 31, 1995 and
the six months ended June 30, 1996
<TABLE>
<CAPTION>
Common Stock Additional
------------------- paid-in Unearned
Shares Amount capital Deficit compensation Total
----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 2,792,500 $ 2,793 $ 284,740 $ (166,993) $ 120,540
Private Placement of units 57,500 57 65,258 65,315
Proceeds from public offering net of
$277,743 in offering costs 1,500,000 1,500 4,821,027 4,822,527
Shares issued to the Advisory
Committee 130,000 130 519,870 (520,000) --
Compensation Expense 129,960 129,960
Net loss for the year ended December
31, 1995 (619,831) (619,831)
----------- ----------- ----------- ----------- ----------- -----------
4,480,000 4,480 5,690,895 (786,824) (390,040) 4,518,511
Shares issued to Consultant 70,000 70 (70)
Compensation expense 130,000 130,000
Net loss for the six months ended
June 30, 1996 (647,792) (647,792)
----------- ----------- ----------- ----------- ----------- -----------
Balance, June 30, 1996 4,550,000 $ 4,550 $ 5,690,825 $(1,434,616) $ (260,040) $ 4,000,719
=========== =========== =========== =========== =========== ===========
</TABLE>
6
<PAGE>
U.S. Opportunity Search, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Accounting Policies
The unaudited interim financial statements of U.S. Opportunity Search,
Inc. and Subsidiaries (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial
information. 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 the Company, the accompanying unaudited financial
statements contain all adjustments (consisting of normal recurring
entries) necessary to present fairly the financial position as of June
30, 1996, and the results of operations, changes in stockholders'
equity and cash flows for the six-month periods ended June 30, 1996
and 1995, respectively.
The results reported for the six-month period ended June 30, 1996 are
not necessarily indicative of the results of operations which may be
expected for a full year.
Note 2 - Spintech Acquisition
On September 24, 1994, the Company entered into an agreement with
Spintech, Inc. ("Spintech") to acquire 65% of the Spintech's stock on
a fully-diluted basis. Spintech has developed various patented
products for use by healthcare providers and had limited sales of the
first of these products, known as "TAPS," which sterilize, destroy,
and encapsulate certain medical waste. The encapsulated waste can then
be discarded as unregulated waste.
In November 1995, the Company completed the purchase of 65% of
Spintech's outstanding stock on a fully diluted basis for $2,700,000.
The Company paid $2,026,495, which represents the $2,700,000 less
amounts advanced to Spintech amounting to $632,500 plus interest of
$41,005. The acquisition has been recorded using the purchase method
of accounting. The excess of the aggregate purchase price over the net
tangible assets acquired was allocated to patents and is being
amortized over ten years. The operating results of Spintech have been
included in the Company's consolidated financial statements since the
date of acquisition. Therefore, only the June 30, 1996 consolidated
financial statements include the operating results of Spintech.
7
<PAGE>
U.S. Opportunity Search, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(Note 2 continued)
The Company also holds a series of annual options to purchase, for a
nominal amount, an additional 3% of Spintech's outstanding shares
following each of the first five fiscal years commencing after the
closing of the stock purchase (or an aggregate of 15% of such shares
if all of the options are exercised). Each option is exercisable only
if Spintech does not achieve a specified pretax profit target as
defined in the applicable fiscal year. In addition, the Company has
agreed to provide a one-year revolving working capital line of credit
for Spintech in the amount of $500,000 bearing interest at the rate of
8% per annum.
Note 3 - Shareholder's Agreement
On March 12, 1995, the Company entered into a shareholder's agreement to form
Princeton, PMC, Inc., a corporation, to engage in the marketing and sales of
dental products. The Company has contributed $85,000 for 200 shares of this
entity representing a two-thirds ownership.
8
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
The Company acquired a 65% equity interest in Spintech during
November 1995 and founded Princeton, PMC as a 66(2)/(3)% owned
subsidiary during March 1996. Therefore Spintech and Princeton, PMC's
operating results are not reflected in the three months and six months
ended June 30, 1995.
Three Months Ended June 30, 1996 compared with the Three Months Ended
June 30, 1995
Revenues for the three months ended June 30, 1996 were $33,027,
reflecting sales of Spintech's "TAPS" units and related accessories.
No sales were recorded in the comparable period in 1995, which
occurred prior to the date of the Company's acquisition of an equity
interest in Spintech.
Cost of goods sold were $20,502, reflecting the costs associated
with sales of "TAPS" units and accessories. No costs were incurred in
the prior year.
Selling, general and administrative expenses increased to
$424,070 in 1996 from $140,011 in 1995, an increase of $284,059 (203%)
reflecting, primarily, new selling general and administrative expenses
of $198,800 at Spintech and Princeton, PMC, not reflected in the
Company's financial statement for the prior year, amortization of
deferred compensation expense of $65,000 and additional marketing and
administrative expenses as the Company geared up for expected higher
levels of operations.
Research and development costs were $25,975 reflecting primarily
activities at Spintech.
Interest Income increased to $18,818 in 1996 from $10,102 in 1995
and increase of $8.716, reflecting interest earned on the remaining
proceeds of the Company's public offering. Other income consisted of
the proceeds from the settlement of a judgment obtained by Spintech
for costs incurred in its successful defense of a patent infringement
suit.
9
<PAGE>
Six Months Ended June 30, 1996 compared with the Six Months Ended June
30, 1995
Revenues for the six months ended June 30, 1996 were $107,385,
reflecting sales of Spintech's "TAPS" units and related accessories.
No sales were recorded in the comparable period in 1995, which
occurred prior to the date of the Company's acquisition of an equity
interest in Spintech.
Cost of goods sold were $73,028, reflecting the costs associated
with sales of "TAPS" units and accessories. No costs were incurred in
the prior year.
Selling, general and administrative expenses increased to
$840,259 in 1996 from $253,500 in 1995, an increase of $586.759
($231%) reflecting, primarily, new selling general and administrative
expenses of $374,129 at Spintech and Princeton, PMC, not reflected in
the Company's financial statement for the prior year, amortization of
deferred compensation expense of $130,000 and additional marketing and
administrative expenses as the company geared up for expected higher
levels of operations.
Research and development costs were $63,773 reflecting primarily
activities at Spintech.
Interest Income increased to $42,711 in 1996 from $18,952 in 1995
an increase of $23.759, reflecting interest earned on the proceeds of
the Company's public offering. Other income consisted primarily of the
proceeds from the settlement of a judgment obtained by Spintech for
costs incurred in its successful defense of a patent infringement
suit.
Liquidity and Capital Resources
At June 30, 1996, the Company's working capital was $1,670,115,
primarily reflecting the balance remaining of the net proceeds of
$4,822,527 received on consummation of the 1995 public offering, of
which $2,700,000 was used to purchase a 65% equity interest in
Spintech. The 1995 public offering also allowed the Company to pay its
outstanding indebtedness and provided the capital resources necessary
to funds its operation.
10
<PAGE>
Part II Other Information
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the three
months ended June 30, 1996.
11
<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. OPPORTUNITY SEARCH, INC.
(Registrant)
By: Leonard Osser
--------------------------------------
Dated: August 14, 1996 LEONARD OSSER
President, Chief Executive Officer and
Chief financial and Accounting Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from June 30,1996
and is qualified in it's entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,670,115
<SECURITIES> 0
<RECEIVABLES> 8,808
<ALLOWANCES> 0
<INVENTORY> 104,746
<CURRENT-ASSETS> 1,809,553
<PP&E> 104,746
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,143,540
<CURRENT-LIABILITIES> 56,596
<BONDS> 0
0
0
<COMMON> 4,550
<OTHER-SE> 4,091,494
<TOTAL-LIABILITY-AND-EQUITY> 4,143,540
<SALES> 107,385
<TOTAL-REVENUES> 107,385
<CGS> 73,028
<TOTAL-COSTS> 73,028
<OTHER-EXPENSES> 904,032
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (647,792)
<INCOME-TAX> 0
<INCOME-CONTINUING> (647,792)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (647,792)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
