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 September 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 November 11, 1996 the Registrant had a total of 4,610,000
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 Nine Months Ended September 30, 1996
Page Number
Part I. Financial Information.............................................3
Item 1: Financial Statements (unaudited)..................................3
Consolidated balance sheets as of September 30,
1996 and
December 31, 1995.................................................3
Consolidated statements of operations for the
three months
and nine months ended September 30, 1996 and 1995.................4
Consolidated statements of cash flows for the
three months
ended September 30, 1996 and 1995.................................5
Consolidate statement of changes in stockholder
equity for the year ended December 31, 1995 and the nine
months ended September 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
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
U. S. Opportunity Search, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, December 31,
ASSETS 1996 1995
------------- ------------
CURRENT ASSETS
Cash and cash equivalents $ 1,386,133 $ 2,331,639
Accounts receivable 28,277 5,759
Inventories 67,040 92,346
Prepaid other assets 88,735 5,178
------------- ------------
Total current assets 1,570,185 2,434,922
Property and equipment, net 188,870 74,178
Patents 2,097,202 2,269,360
Other assets 550 1,500
------------- ------------
Total assets $ 3,856,807 $ 4,779,960
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 78,357 $ 54,320
Accrued Expenses 31,580 29,561
------------- ------------
Total current liabilities 109,937 83,881
------------- ------------
MINORITY INTEREST 17,430 177,568
STOCKHOLDERS' EQUITY
Common stock, par value $.001; authorized,
10,000,000 shares; issued and outstanding,
4,610,000 shares 4,610 4,480
Additional paid-in Capital 6,073,265 5,690,895
Deficit ( 2,153,395) ( 786,824)
Unearned Compensation ( 195,040) ( 390,040)
------------- ------------
Total stockholders' equity 3,746,870 4,696,079
------------- ------------
Total liabilities and
stockholder's equity $ 3,856,807 $4,779,960
============= ==========
3
<PAGE>
U.S. Opportunity Search, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For the nine months ended September 30,
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
----------------- ------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues $ 154,856 $ -- $ 47,471 $ --
Cost of sales 96,243 -- 23,215 --
----------- ----------- ----------- -----------
Gross profit 58,613 -- 24,256 --
----------- ----------- ----------- -----------
Selling, general and
administrative expense 1,631,329 377,375 791,070 123,875
Research and development
expense 98,710 -- 34,937 --
----------- -----------
Loss from operations (1,671,426) (377,375) (801,751) (123,875)
Other income and expense
Interest income 56,888 32,671 14,177 13,719
Other income 72,926 -- -- --
Minority interest in net
loss of
subsidiaries 175,040 -- 68,794 --
----------- ----------- ----------- -----------
NET LOSS $(1,366,572) $ (344,704) $ (718,780) $ (110,156)
=========== =========== =========== ===========
Loss per share $ (0.30) $ (0.12) $ (0.16) $ (0.04)
Weighted average shares
outstanding 4,557,333 2,850,000 4,610,000 2,850,000
</TABLE>
- ----------
See Notes to Consolidated Financial Statements
4
<PAGE>
U.S. Opportunity Search, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
----------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net loss $(1,366,572) $(344,704) $ (718,780) $(110,156)
Adjustment to reconcile net loss to net cash
used in operating activities
Amortization of excess of purchase price
over tangible net assets 172,158 -- 57,386 --
Amortization and depreciation 2,841 28,362 947 8,850
Loss applicable to minority interest (175,040) -- (68,794) --
Compensation expense 577,500 -- 447,500 --
Changes in assets and liabilities
(Increase) in other assets 950 (239) 4,088 (12,941)
(Increase) in accounts receivable (22,518) -- (19,469) --
(Increase) in inventories 25,306 -- 37,706 --
Decrease in prepaid other assets (83,557) -- (62,851)
Increase in accounts payable 24,037 -- 32,423 650
(Decrease) increase in accrued expenses 2,019 (7,365) 20,918 14,975
Increase in loans receivable -- (291,999) -- (171,500)
----------- --------- ----------- ---------
Net cash used in operating activities (842,876) (615,945) (268,926) (270,122)
----------- --------- ----------- ---------
Cash flows from investing activities
Capital expenditures (117,533) -- (15,056) --
----------- --------- ----------- ---------
Net cash used in investing activities (117,533) -- (15,056) --
----------- --------- ----------- ---------
Cash flows from financing activities
Net proceeds form issuance of common stock 1 58 -- --
Paid in capital 14,902 (9,145) -- (15,057)
Offering costs -- (5,609) -- --
Proceeds from issuance of debt -- 532,621 -- 93,419
(Repay) Loans from stockholders -- 87,000 -- 97,000
Deferred offering costs -- -- -- --
----------- --------- ----------- ---------
Net cash provided by financing activities 14,903 604,925 -- 175,362
----------- --------- ----------- ---------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (945,506) (11,020) (283,982)) (94,760)
Cash and cash equivalents at beginning of year 2,331,639 13,920 1,670,115 97,660
----------- --------- ----------- ---------
Cash and cash equivalents at end of year $ 1,386,133 $ 2,900 $ 1,386,133 $ 2,900
=========== ========= =========== =========
</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 nine months ended September 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 130,000 130 382,370 382,500
Compensation expense 195,000 195,000
Net loss for the nine months ended
September 30, 1996 (1,366,572) (1,366,572)
---------- ----------- ----------- ----------- ----------- ----------
Balance, September 30, 1996 4,610,000 $ 4,610 $ 6,073,265 $(2,153,396) $ (195,040) $3,729,439
---------- ----------- ----------- ----------- ----------- ==========
</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
September 30, 1996, and the results of operations, changes in
stockholders' equity and cash flows for the nine-month periods ended
September 30, 1996 and 1995, respectively.
The results reported for the nine-month period ended September 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
September 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
September 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 nine months ended
September 30, 1995.
Three Months Ended September 30, 1996 compared with the Three Months Ended
September 30, 1995
Revenues for the three months ended September 30, 1996 were $47,471,
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 $23,215, 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 $791,070
in 1996 from $123,785 in 1995, an increase of $667,285 (539%) reflecting,
primarily, new selling general and administrative expenses of $181,734 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, compensation to a consultant of $382,500 and
additional marketing and administrative expenses as the Company geared up
for expected higher levels of operations.
Research and development costs were $34,937 reflecting primarily
activities at Spintech.
Interest Income increased to $14,177 in 1996 from $13,719 in 1995
and increase of $458, reflecting interest earned on the remaining proceeds
of the Company's public offering.
9
<PAGE>
Nine Months Ended September 30, 1996 compared with the Nine Months Ended
September 30, 1995
Revenues for the nine months ended September 30, 1996 were $154,856,
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 $96,243, 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 $1,631,329
in 1996 from $377,375 in 1995, an increase of $1,253,954 (332%)
reflecting, primarily, new selling general and administrative expenses of
$530,569 at Spintech and Princeton, PMC, not reflected in the Company's
financial statement for the prior year, amortization of deferred
compensation expense of $195,000 compensation to a consultant of $382,500
and additional marketing and administrative expenses as the company geared
up for expected higher levels of operations.
Research and development costs were $98,710 reflecting primarily
activities at Spintech.
Interest Income increased to $56,888 in 1996 from $32,671 in 1995 an
increase of $24,217, 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 September 30, 1996, the Company's working capital was $1,386,133,
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 September 30, 1996.
<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)
---------------------------------
Dated: November 11, 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 Form 10-QSB
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,386,133
<SECURITIES> 0
<RECEIVABLES> 28,277
<ALLOWANCES> 0
<INVENTORY> 67,040
<CURRENT-ASSETS> 1,570,185
<PP&E> 188,870
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,856,807
<CURRENT-LIABILITIES> 109,937
<BONDS> 0
0
0
<COMMON> 4,610
<OTHER-SE> 6,073,265
<TOTAL-LIABILITY-AND-EQUITY> 3,856,807
<SALES> 154,856
<TOTAL-REVENUES> 154,856
<CGS> 96,243
<TOTAL-COSTS> 96,243
<OTHER-EXPENSES> 1,730,039
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,888
<INCOME-PRETAX> (1,366,572)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,366,572)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,366,572
<EPS-PRIMARY> (.30)
<EPS-DILUTED> 0
</TABLE>
