SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1997
Central Index Key # 856572
Commission File Number: 33-31566
ULTRA SHIELD PRODUCTS INTERNATIONAL, INC.
(formerly Aerial Acquisitions Inc.)
Exact Name of Registrant as Specified in its Charter
Delaware 77-0219055
State or Other Jurisdiction of IRS Employer Iden-
Incorporation or Organization tification Number
10096 Sixth Street, Units M-P
Rancho Cucamonga, California 91730
Address of Principal Executive Offices Zip Code
(909) 466-0081
Registrant's Telephone Number,
Including Area Code
N/A
Former Name, Former Address and Former Fiscal
Year, if Changed Since Last Report
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 No X
As of September 30, 1997, 17,635,927 shares of Common Stock; 16,120,486 Class
A and 16,120,486 Class B common stock purchase warrants were outstanding.
Transitional Small Business Disclosure Format: Yes No X
Item 1. Financial Statements.
See attached.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Since inception in 1989, the Registrant has relied principally on the
proceeds from one public offering and several private offerings of its
securities to fund operations. The Registrant has used the proceeds from
these offerings and the limited revenues it has received from sales of the
Registrant's products to fund research and development activities and to cover
its recurring operating deficits. From inception in March, 1989 to September
30, 1997, a total of $11,928,421 (net) has been received from these financial
activities. At September 30, 1997, the Registrant had cash and cash
equivalents totaling $32,376 available to cover recurring operating deficits
and research and development expenses.
The Registrant incurs considerable expense in demonstrating and testing
its products. Government approvals for each of the products and adaptations
thereto must be obtained before its products may be marketed. The Registrant
is also incurring substantial expenses in demonstrating its products to
prospective customers, both civilian and governmental. During 1995, the
Registrant's Board of Directors determined that the results of its marketing
efforts in conjunction with its recently developed blend center warranted
concentrating marketing efforts on the distribution of blend centers with
particular concentration on regional and national restaurant chain
franchisees. As a result, it changed its marketing strategy to one whereby it
is currently attempting to establish relationships with owners of regional and
national restaurant chain franchises, while also pursuing relationships with
other potential high volume consumers in both the civilian and governmental
sectors in an effort to broaden its distribution and gain market acceptance.
A significant number of such relationships have been established to date.
Management believes that this approach will result in substantially higher
revenues from product sales and thereby significantly improve the Registrant's
liquidity.
The Registrant's long term viability is dependent upon improving
liquidity through increased product sales. In the interim, Management
believes that the current cash in its account and cash from ongoing operations
should be adequate to meet its research and development, marketing,
administrative expenses and cash commitments through fiscal 1997 or until the
Registrant reaches consistent profitability from ongoing internal operations
if that is later. The Registrant may continue to offer its securities on a
public or private basis as a means of supplementing its liquidity from ongoing
operations.
Other than continuing development expenses related to new products,
estimated to be 3% of the Registrant's net revenues on an annual basis,
commitments under facilities' leases totaling $134,132 through August, 1999,
the Registrant has no other known commitments for its capital resources as of
September 30, 1997. Management believes that cash available from ongoing
operations and, if necessary, from additional financing, will cover these
commitments.
The Registrant's total assets increased from $1,159,393 at September 30,
1996 and $1,544,435 at December 31, 1996 to $3,161,709 at September 30, 1997,
increases of $2,002,316 (173%) and $1,617,274 (105%), respectively, primarily
due to increases in prepaid expenses and accounts receivables.
The Registrant's total liabilities decreased from $2,373,531 at
September 30, 1996 and $2,171,376 at December 31, 1996 to $1,836,137 at
September 30, 1997, decreases of $537,394 and $335,239, respectively,
primarily due to decreases in notes payable to stockholders.
The Registrant's accrued expenses decreased from $455,669 at September
30, 1996 and $152,420 at December 31, 1996 to $6,500 at September 30, 1997,
decreases of $449,169 and $145,920, respectively, primarily due to the payment
of expenses with cash or stock.
The Registrant's notes payable decreased from $1,706,718 at September
30, 1996 and $1,747,184 at December 31, 1996 to $922,359 at September 30,
1997, decreases of $784,359 and $824,825, respectively, due primarily to net
amounts of convertible promissory notes paid versus the conversion of
outstanding promissory notes to common stock subscribed.
The Registrant's accounts payable increased from $82,026 at September
30, 1996 and $74,869 at December 31, 1996 to $750,550 at September 30, 1997,
increases of $675,681 and $668,524, respectively, primarily due to the accrual
of operating expenses for the current period and increased inventory
purchases.
The Registrant's accumulated deficit increased from $8,354,196 at
September 30, 1996 and $8,809,047 at December 31, 1996 to $9,677,327,
increases of 9.9% and 15.8% respectively, primarily due to increased net
losses from operations.
Since inception, the Registrant has experienced significant losses from
operations in each successive period. For the nine months ended September 30,
1997, as compared to the nine months ended September 30, 1996, net loss from
operations decreased $219,668 (21%) to $848,082 from $1,067,750; gross sales
of products increased $1,458,013 (1,275%) to $1,461,797 from $114,398; cost of
product sales increased $598,189 (927%) to $662,704 from $64,515; selling,
general and administrative expenses increased $722,736 (70%) to $1,757,789
from $1,035,053; and, interest expense increased $37,005 (45%) to $119,585
from $82,580. The Registrant achieved a gross profit percentage of
approximately 58% for the nine month period ended September 30, 1997 as
compared to 46% for the nine month period ended September 30, 1996 and 23% for
the year ended December 31, 1996.
Management expects to be able to maintain or improve gross profit
margins into the future. Currently, the Registrant sells most of its products
by the gallon in various sized containers and prices its products based on
container size. The Registrant has experienced no price pressure and
structures its prices to be competitive with other products sold in similar
markets.
Since inception, the Registrant has primarily used equity financing
transactions and borrowing convertible to equity securities to improve it
liquidity while operations have been unable, until at least early 1998, to
generate adequate working capital. Net cash used in operating activities for
the nine months ended September 30, 1997 was $3,472,713.
As a result of what Management perceives to be an ever-increasing
societal emphasis on the utilization of environmentally responsible products
in a responsible and efficient manner, Management believes that the
Registrant's products, which are principally aqueous based, non-toxic and
biodegradable, have significant future market potential, especially when
considered in conjunction with the Registrant's blend center method of product
distribution, although the extent of that potential can not be determined at
this time.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
During the period covered by this Report, the three months ended
September 30, 1997, there were no material developments relating to the
Registrant's legal proceedings as described in its June 30, 1997 Form 10-QSB.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
Effective July 31, 1997, Messrs. Brent Humphries and Eric Ward were
elected to the Registrant's Board of Directors.
Item 6. Exhibits and Reports on Form 8-K.
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 13, 1997 ULTRA SHIELD PRODUCTS INTERNATIONAL, INC.
By /s/ J.W. Rutherford
J.W. Rutherford, President
ULTRA SHIELD PRODUCTS INT'L, INC.
BALANCE SHEET
SEPTEMBER 30, 1997
ASSETS
CURRENT ASSETS
CASH ON HAND AND IN BANKS $ <15.00>
CASH-CALIF STATE BANK-#001 16,434.95
PETTY CASH 750.00
CASH-UPLAND BANK 12,117.80
CASH-SMITH BARNEY MONEY MKT 588.52
UPLAND BANK-CERT. OF DEPOSIT 2,500.00
ACCOUNTS RECEIVABLE 1,255,653.95
ALLOWANCE FOR BAD DEBTS <139,949.37>
ACCRUED INTEREST RECEIVABLE 2,949.37
NOTES RECEIVABLE-OFFICERS 75,000.00
NOTES RECEIVABLE-EMPLOYEES 25,000.00
EMPLOYEE ADVANCES 5,143.31
NOTES RECEIVABLE-OTHERS 215,617.00
OFFICERS ADVANCES 517.00
COMMISSSION ADVANCES 500.00
INVENTORY-FINISHED GOODS <75,552.62>
INVENTORY-PRODUCT 26,221.10
INVENTORY-BOTTLES 25,118.38
INVENTORY-CAPS 3,670.00
INVENTORY-SPRAYERS 41,748.25
INVENTORY-LABELS 110,860.65
INVENTORY-DISPLAYS 43,150.00
INVENTORY-MISC. 41,230.43
INVENTORY-TRAINING TAPES 15,096.12
INVENTORY-BLEND CTR COMPONETS 63,813.84
INVENTORY-RESERVE <62,740.00>
PREPAID EXPENSES 1,022,707.77
PREPAID- 19,213.90
MISC. & A/R OVERPMTS PAYABLES <72.17>
-----------------
TOTAL CURRENT ASSETS 2,747,273.18
PROPERTY AND EQUIPMENT
LONG TERM RECEIVABLES 72.17
FURNITURE AND FIXTURES 82,731.93
MACHINERY AND EQUIPMENT 157,172.55
COMPUTER EQUIPMENT 64,141.93
TRADE SHOW EQUIPMENT 21,369.35
LEASEHOLD IMPROVEMENTS 49,135.89
ACCUMULATED DEPRECIATION <254,136.00>
PROPERTY AND EQUIPMENT (NET) 29,439.24
-----------------
TOTAL PROPERTY AND EQUIPMENT 149,927.06
OTHER ASSETS
CAPITAL LEASE EQUIPMENT 67,923.00
REFUNDABLE DEPOSITS 2,850.00
INVESTMENT-REAL ESTATE 187,762.31
EXECUTIVE INSURANCE VALUE 5,974.18
-----------------
TOTAL OTHER ASSETS 264,509.49
-----------------
TOTAL ASSETS $ 3,161,709.73
=================
LIABILITIES AND CAPITAL
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 750,550.36
ACCRUED INTEREST 74,265.59
FEDERAL INC TAX WITHHELD 1,888.59
FICA WITHHELD 1,093.93
FICA-EMPLOYER 4,108.10
STATE INC TAX WITHHELD 433.33
SDI WITHHELD 101.39
FUTA PAYABLE 1,848.18
SUI PAYABLE 11,020.50
SALES TAX PAYABLE 12,332.58
EMPLOYEE CREDIT UNION 665.05
OFFICERS CREDIT LINE <1,878.83>
NOTES PAYABLE-CONV. TO STOCK 922,359.00
UNEARNED DEPOSITS 6,500.00
SUSPENSE 300.00
-----------------
TOTAL CURRENT LIABILITIES 1,785,587.77
LONG-TERM LIABILITIES
CAPITAL LEASE PAYABLE 50,549.45
-----------------
TOTAL LONG-TERM LIABILITIES 50,549.45
-----------------
TOTAL LIABILITIES 1,836,137.22
CAPITAL
COMMON STOCK 1,393.56
STOCK SUBSCRIBED 0.20
ADDITIONAL PAID IN CAPITAL 11,005,488.69
UNREALIZED HOLDING (GAIN)/LOSS <3,982.58>
RETAINED EARNINGS (DEFICIT) <8,829,245.15>
NET INCOME <848,082.21>
-----------------
TOTAL CAPITAL 1,325,572.51
-----------------
TOTAL LIABILITIES & CAPITAL $ 3,161,709.73
=================
UNAUDITED - FOR MANAGEMENT PURPOSES ONLY
ULTRA SHIELD PRODUCTS INT'L, INC.
INCOME STATEMENT
FOR THE NINE MONTHS ENDING SEPTEMBER 30, 1997
CURRENT MONTH YEAR TO DATE
REVENUES
REVENUE-PRODUCT SALES 750,290.28 99.63 1,461,796.94 92.97
SPEED TRUCK RENTAL 3,000.00 0.40 3,000.00 0.19
SALES RETURNS & ALLOWANCES <262.19> <0.03> <1,495.11> <0.10>
INTEREST INCOME 12.21 0.00 14,102.34 0.90
OTHER INCOME 0.00 0.00 95,007.00 6.04
--------------- ---------------
TOTAL REVENUES 753,040.30 100.00 1,572,411.17 100.00
--------------- ---------------
COST OF SALES
PURCHASES 299,117.60 39.72 597,147.01 37.98
FINISHED GOODS 1.61 0.00 3,543.69 0.23
CHEMICALS 346.50 0.05 302.80 0.02
DEIONIZED WATER 0.00 0.00 168.00 0.01
TEST PAPERS & INSTRUCTIONS 0.00 0.00 123.38 0.01
SALARIES-WAREHOUSE 2,398.52 0.32 31,531.06 2.01
SHOP OUTSIDE LABOR 0.00 0.00 81.96 0.01
COMMISSIONS 0.00 0.00 3,228.27 0.21
SMALL TOOLS & SUPPLIES 1,420.31 0.19 5,991.38 0.38
PACKAGING 0.00 0.00 <10,487.50> <0.67>
FREIGHT-IN 0.00 0.00 40.88 0.00
FREIGHT-OUT 3,267.63 0.43 31,033.34 1.97
------------- ---------------
TOTAL COST OF SALES 306,552.17 40.71 662,704.27 42.15
------------- ---------------
GROSS PROFIT 446,488.13 59.29 909,706.90 57.85
------------- ---------------
EXPENSES
ADVERTISING & PROMOTION 79,630.60 10.57 498,938.67 31.73
BLEND CENTERS EXPENSE 622.39 0.08 1,964.73 0.12
PRODUCT SAMPLES 4,852.30 0.64 4,852.30 0.31
SALARIES-SALES 8,999.88 1.20 108,681.04 6.91
PAYROLL TAX EXPENSE 587.90 0.08 3,407.39 0.22
TRADE SHOW EXPENSE 1,467.50 0.19 12,586.87 0.80
RACING SPONSORSHIPS 500.00 0.07 3,239.53 0.21
TOTAL MARKETING EXPENSE 628.00 0.08 628.00 0.04
BAD DEBT EXPENSE 0.00 0.00 5,325.00 0.34
BANK CHARGES AND FEES 16.95 0.00 545.68 0.03
OUTSIDE REFERRALS AND FEES 6.72 0.00 6.72 0.00
DEPRECIATION EXPENSE 13,900.00 1.85 41,700.00 2.65
DONATIONS 200.00 0.03 200.00 0.01
DUES & SUBSCRIPTIONS <102.00> <0.01> 4,177.70 0.27
EMPLOYEE BENEFITS 30.00 0.00 4,142.44 0.26
EMPLOYEE TRAINING 0.00 0.00 158.00 0.01
EQUIPMENT LEASING 0.00 0.00 937.09 0.06
INSURANCE-GENERAL LIABILITY 1,561.10 0.21 15,828.32 1.01
INSURANCE-HEALTH 127.24 0.02 <34.41> 0.00
INSURANCE-WORKER'S COMP 0.00 0.00 3,913.00 0.25
INSURANCE-SUNSET LIFE 1,100.00 0.15 4,929.42 0.31
INSURANCE-AUTO 3,292.78 0.44 10,235.14 0.65
MISC. OPERATING EXPENSES 16,281.49 2.16 43,229.56 2.75
OFFICE EXPENSE 510.96 0.07 13,835.14 0.88
PAYROLL TAX EXPENSE 2,205.88 0.29 28,668.39 1.82
POSTAGE AND DELIVERY 600.00 0.08 9,420.70 0.60
PRINTING 165.30 0.02 13,207.20 0.84
PROFESSIONAL-ACCOUNTING 38,319.86 5.09 102,900.44 6.54
PROFESSIONAL-COMPUTER CONSULT 396.90 0.05 2,862.66 0.18
PROFESSIONAL-LEGAL 10,324.35 1.37 73,800.13 4.69
PROFESSIONAL-OTHER
CONSULTING 100,000.00 13.28 99,037.50 6.30
PROFESSIONAL-STOCK SERVICES 6,212.70 0.83 48,237.27 3.07
RENT EXPENSE 0.00 0.00 50,299.83 3.20
REPAIRS & MAINT-BUILDING 40.00 0.01 1,910.49 0.12
REPAIRS & MAINT-EQUIPMENT 3,118.32 0.41 16,504.87 1.05
SALARIES-ADMINISTRATIVE 11,576.04 1.54 153,676.77 9.77
SALARIES-OFFICERS 5,938.06 0.79 100,073.89 6.36
TAXES-PERSONAL PROPERTY 224.52 0.03 224.52 0.01
TELEPHONE-COMMUNICATIONS 987.71 0.13 4,614.86 0.29
TELEPHONE-GTE LEASING 908.43 0.12 8,657.29 0.55
TELEPHONE-CELLULAR 0.17 0.00 6,282.53 0.40
TELEPHONE-WCT LONG DISTANCE 26.52 0.00 5,445.32 0.35
AUTO EXPENSE (PREV. TRVL/AUTO) 4,624.74 0.61 27,576.78 1.75
TRAVEL EXPENSE & ADVANCES 4,872.88 0.65 34,210.64 2.18
TRUCK AND AUTO LEASING 963.14 0.13 15,712.76 1.00
UTILITIES 1,680.15 0.22 13,540.53 0.86
INTEREST EXPENSE 30,047.31 3.99 119,585.09 7.61
PENALTIES 5,230.72 0.69 11,870.27 0.75
REALIZED LOSS ON INVESTMENTS 0.00 0.00 2,203.50 0.14
SERVICES FOR NOTES/STOCK 569.25 0.08 22,237.55 1.41
PROVISION-FRANCHISE TAX 0.00 0.00 1,600.00 0.10
------------- ---------------
TOTAL EXPENSES 363,246.76 48.24 1,757,789.11 111.79
------------- ---------------
NET INCOME $ 83,241.37 11.05 $ <848,082.21> <53.94>
============= ===============
FOR MANAGEMENT PURPOSES ONLY
ULTRA SHIELD PRODUCTS INT'L, INC.
INCOME STATEMENT
FOR THE NINE MONTHS ENDING SEPTEMBER 30, 1997
CURRENT MONTH CURRENT MONTH
THIS YEAR LAST YEAR
REVENUES
REVENUE-PRODUCT SALES 750,290.28 114,641.53
REVENUE-OTHER SALES 0.00 243.55
SPEED TRUCK RENTAL 3,000.00 0.00
SALES RETURNS & ALLOWANCES <262.19> 0.00
INTEREST INCOME 12.21 5,720.87
OTHER INCOME 0.00 0.00
--------------- ---------------
TOTAL REVENUES 753,040.30 120,605.95
--------------- ---------------
COST OF SALES
PURCHASES 299,117.60 0.00
FINISHED GOODS 1.61 0.00
CHEMICALS 346.50 36,774.99
CONTAINERS 0.00 1,557.52
DEIONIZED WATER 0.00 565.00
TEST PAPERS & INSTRUCTIONS 0.00 1,417.98
SALARIES-WAREHOUSE 2,398.52 0.00
SHOP OUTSIDE LABOR 0.00 0.00
COMMISSIONS 0.00 6,766.83
SMALL TOOLS & SUPPLIES 1,420.31 910.85
PACKAGING 0.00 1,797.75
FREIGHT-IN 0.00 6,435.06
FREIGHT-OUT 3,267.63 8,532.88
PURCHASE DISCOUNTS 0.00 243.55
--------------- ---------------
TOTAL COST OF SALES 306,552.17 65,002.41
--------------- ---------------
GROSS PROFIT 446,488.13 55,603.54
--------------- ---------------
EXPENSES
ADVERTISING & PROMOTION 79,630.60 57,124.91
BLEND CENTERS EXPENSE 622.39 30,223.26
PRODUCT SAMPLES 4,852.30 16,126.04
SALARIES-SALES 8,999.88 0.00
PAYROLL TAX EXPENSE 587.90 0.00
TRADE SHOW EXPENSE 1,467.50 67,451.17
RACING SPONSORSHIPS 500.00 73,092.32
TOTAL MARKETING EXPENSE 628.00 0.00
BAD DEBT EXPENSE 0.00 3,983.47
BANK CHARGES AND FEES 16.95 1,114.01
OUTSIDE REFERRALS AND FEES 6.72 5,663.00
DEPRECIATION EXPENSE 13,900.00 24,843.00
DONATIONS 200.00 0.00
DUES & SUBSCRIPTIONS <102.00> 2,637.45
EMPLOYEE BENEFITS 30.00 1,682.64
EMPLOYEE TRAINING 0.00 0.00
EQUIPMENT LEASING 0.00 12,974.51
INSURANCE-GENERAL LIABILITY 1,561.10 16,142.13
INSURANCE-HEALTH 127.24 5,115.96
INSURANCE-WORKER'S COMP 0.00 4,020.00
INSURANCE-CALMAR 0.00 1,205.00
INSURANCE-SUNSET LIFE 1,100.00 0.00
INSURANCE-AUTO 3,292.78 0.00
MISC. OPERATING EXPENSES 16,281.49 <1,217.99>
OFFICE EXPENSE 510.96 32,543.93
PAYROLL TAX EXPENSE 2,205.88 17,320.94
POSTAGE AND DELIVERY 600.00 4,091.68
PRINTING 165.30 422.43
PROFESSIONAL-ACCOUNTING 38,319.86 57,756.00
PROFESSIONAL-COMPUTER CONSULT 396.90 0.00
PROFESSIONAL-LEGAL 10,324.35 119,904.33
PROFESSIONAL-OTHER CONSULTING 100,000.00 4,055.75
PROFESSIONAL-STOCK SERVICES 6,212.70 5,761.98
PROMOTION & ENTERTAINMENT 0.00 18,456.48
RENT EXPENSE 0.00 38,642.87
REPAIRS & MAINT-BUILDING 40.00 628.57
REPAIRS & MAINT-EQUIPMENT 3,118.32 19,036.93
SALARIES-ADMINISTRATIVE 11,576.04 147,481.49
SALARIES-OFFICERS 5,938.06 152,517.66
TAXES, LICENSES & PERMITS 0.00 851.00
TAXES-PERSONAL PROPERTY 224.52 0.00
TELEPHONE-COMMUNICATIONS 987.71 564.42
TELEPHONE-GTE LEASING 908.43 4,594.95
TELEPHONE-CELLULAR 0.17 7,889.27
TELEPHONE-WCT LONG DISTANCE 26.52 5,885.16
AUTO EXPENSE (PREV. TRVL/AUTO) 4,624.74 28,084.02
TRAVEL EXPENSE & ADVANCES 4,872.88 0.00
TRUCK AND AUTO LEASING 963.14 15,236.08
UNIFORMS 0.00 143.31
UTILITIES 1,680.15 10,070.53
INTEREST EXPENSE 30,047.31 82,579.79
PENALTIES 5,230.72 997.41
REALIZED LOSS ON INVESTMENTS 0.00 0.00
DESIGN EXPENSE 0.00 455.87
SERVICES FOR NOTES/STOCK 569.25 25,200.00
PROVISION-FRANCHISE TAX 0.00 0.00
--------------- ---------------
TOTAL EXPENSES 363,246.76 1,123,353.73
--------------- ---------------
NET INCOME $ 83,241.37 $ <1,067,750.19>
=============== ===============
FOR MANAGEMENT PURPOSES ONLY
ULTRA SHIELD PRODUCTS INT'L, INC.
INCOME STATEMENT
FOR THE NINE MONTHS ENDING SEPTEMBER 30, 1997 (CONT'D.)
YEAR TO DATE YEAR TO DATE
THIS YEAR LAST YEAR
REVENUES
REVENUE-PRODUCT SALES 1,461,796.94 114,641.53
REVENUE-OTHER SALES 0.00 243.55
SPEED TRUCK RENTAL 3,000.00 0.00
SALES RETURNS & ALLOWANCES <1,495.11> 0.00
INTEREST INCOME 14,102.34 5,720.87
OTHER INCOME 95,007.00 0.00
--------------- ---------------
TOTAL REVENUES 1,572,411.17 120,605.95
--------------- ---------------
COST OF SALES
PURCHASES 597,147.01 0.00
FINISHED GOODS 3,543.69 0.00
CHEMICALS 302.80 36,774.99
CONTAINERS 0.00 1,557.52
DEIONIZED WATER 168.00 565.00
TEST PAPERS & INSTRUCTIONS 123.38 1,417.98
SALARIES-WAREHOUSE 31,531.06 0.00
SHOP OUTSIDE LABOR 81.96 0.00
COMMISSIONS 3,228.27 6,766.83
SMALL TOOLS & SUPPLIES 5,991.38 910.85
PACKAGING <10,487.50> 1,797.75
FREIGHT-IN 40.88 6,435.06
FREIGHT-OUT 31,033.34 8,532.88
PURCHASE DISCOUNTS 0.00 243.55
--------------- ---------------
TOTAL COST OF SALES 662,704.27 65,002.41
--------------- ---------------
GROSS PROFIT 909,706.90 55,603.54
--------------- ---------------
EXPENSES
ADVERTISING & PROMOTION 498,938.67 57,124.91
BLEND CENTERS EXPENSE 1,964.73 30,223.26
PRODUCT SAMPLES 4,852.30 16,126.04
SALARIES-SALES 108,681.04 0.00
PAYROLL TAX EXPENSE 3,407.39 0.00
TRADE SHOW EXPENSE 12,586.87 67,451.17
RACING SPONSORSHIPS 3,239.53 73,092.32
TOTAL MARKETING EXPENSE 628.00 0.00
BAD DEBT EXPENSE 5,325.00 3,983.47
BANK CHARGES AND FEES 545.68 1,114.01
OUTSIDE REFERRALS AND FEES 6.72 5,663.00
DEPRECIATION EXPENSE 41,700.00 24,843.00
DONATIONS 200.00 0.00
DUES & SUBSCRIPTIONS 4,177.70 2,637.45
EMPLOYEE BENEFITS 4,142.44 1,682.64
EMPLOYEE TRAINING 158.00 0.00
EQUIPMENT LEASING 937.09 12,974.51
INSURANCE-GENERAL LIABILITY 15,828.32 16,142.13
INSURANCE-HEALTH <34.41> 5,115.96
INSURANCE-WORKER'S COMP 3,913.00 4,020.00
INSURANCE-CALMAR 0.00 1,205.00
INSURANCE-SUNSET LIFE 4,929.42 0.00
INSURANCE-AUTO 10,235.14 0.00
MISC. OPERATING EXPENSES 43,229.56 <1,217.99>
OFFICE EXPENSE 13,835.14 32,543.93
PAYROLL TAX EXPENSE 28,668.39 17,320.94
POSTAGE AND DELIVERY 9,420.70 4,091.68
PROFESSIONAL-ACCOUNTING 102,900.44 57,756.00
PROFESSIONAL-COMPUTER CONSULT 2,862.66 0.00
PROFESSIONAL-LEGAL 73,800.13 119,904.33
PROFESSIONAL-OTHER CONSULTING 99,037.50 4,055.75
PROFESSIONAL-STOCK SERVICES 48,237.27 5,761.98
PROMOTION & ENTERTAINMENT 0.00 18,456.48
RENT EXPENSE 50,299.83 38,642.87
REPAIRS & MAINT-BUILDING 1,910.49 628.57
REPAIRS & MAINT-EQUIPMENT 16,504.87 19,036.93
SALARIES-ADMINISTRATIVE 153,676.77 147,481.49
SALARIES-OFFICERS 100,073.89 152,517.66
TAXES, LICENSES & PERMITS 0.00 851.00
TAXES-PERSONAL PROPERTY 224.52 0.00
TELEPHONE-COMMUNICATIONS 4,614.86 564.42
TELEPHONE-GTE LEASING 8,657.29 4,594.95
TELEPHONE-CELLULAR 6,282.53 7,889.27
TELEPHONE-WCT LONG DISTANCE 5,445.32 5,885.16
AUTO EXPENSE (PREV. TRVL/AUTO) 27,576.78 28,084.02
TRAVEL EXPENSE & ADVANCES 34,210.64 0.00
TRUCK AND AUTO LEASING 15,712.76 15,236.08
UNIFORMS 0.00 143.31
UTILITIES 13,540.53 10,070.53
INTEREST EXPENSE 119,585.09 82,579.79
PENALTIES 11,870.27 997.41
REALIZED LOSS ON INVESTMENTS 2,203.50 0.00
DESIGN EXPENSE 0.00 455.87
SERVICES FOR NOTES/STOCK 22,237.55 25,200.00
PROVISION-FRANCHISE TAX 1,600.00 0.00
-------------- --------------
TOTAL EXPENSES 1,757,789.11 1,123,353.73
-------------- --------------
NET INCOME $ <848,082.21> $ <1,067,750.19>
============== ==============
FOR MANAGEMENT PURPOSES ONLY
ULTRA SHIELD PRODUCTS INT'L, INC.
STATEMENT OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
CURRENT MONTH YEAR TO DATE
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 83,241.37 $ <848,082.21>
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES
ACCUMULATED DEPRECIATION 13,900.00 41,700.00
ACCOUNTS RECEIVABLE <703,867.44> <1,225,050.51>
ALLOWANCE FOR BAD DEBTS 0.00 5,325.00
NOTES RECEIVABLE-OFFICERS 0.00 38,614.03
EMPLOYEE ADVANCES <771.69> <5,143.31>
NOTES RECEIVABLE-OTHERS 0.00 <198,617.00>
OFFICERS ADVANCES 0.00 <517.00>
COMMISSION ADVANCES 0.00 <500.00>
INVENTORY-FINISHED GOODS 309,238.85 184,736.12
INVENTORY-PRODUCT 244.35 <26,221.10>
INVENTORY-BOTTLES <552.36> 3,955.50
INVENTORY-CAPS 0.00 39,527.00
INVENTORY-SPRAYERS 11.75 <38,659.75>
INVENTORY-LABELS 43.00 <55,050.65>
INVENTORY-DISPLAYS 0.00 3,779.00
INVENTORY-MISC. 953.29 <28,879.36>
INVENTORY-TRAINING TAPES 0.00 5,407.45
INVENTORY-BLEND CTR COMPONETS <13,061.25> <63,813.84>
PREPAID EXPENSES <1,000,368.00> <951,723.81>
PREPAID- <3,085.00> <19,213.90>
PREPAID-ADVERTISING 25,953.24 0.00
ACCOUNTS PAYABLE 93,128.07 675,681.20
ACCRUED INTEREST 9,068.40 23,538.85
FEDERAL INC TAX WITHHELD 0.00 <35,323.41>
FICA WITHHELD 0.00 <10,328.83>
FICA-EMPLOYER 0.00 <7,314.66>
STATE INC TAX WITHHELD 0.00 <13,306.57>
SDI WITHHELD 0.00 <971.77>
FUTA PAYABLE 0.00 824.49
SUI PAYABLE 0.00 4,110.60
ACCRUED EXPENSES 0.00 <23,364.30>
ACCRUED SALARIES & WAGES <11,868.78> <11,868.78>
SALES TAX PAYABLE 1,534.70 8,394.71
EMPLOYEE CREDIT UNION 0.00 547.22
NOTES PAYABLE-JAMGOTCHIAN 0.00 <125,000.00>
OFFICERS CREDIT LINE 0.00 <1,878.83>
NOTES PAYABLE-CONV. TO STOCK <324,500.00> <824,825.00>
UNEARNED DEPOSITS 6,500.00 6,500.00
SUSPENSE 170.03 300.00
--------------- ---------------
TOTAL ADJUSTMENTS <1,597,328.84> <2,624,631.21>
--------------- ---------------
NET CASH PROVIDED BY OPERATIONS <1,514,087.47> <3,472,713.42>
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
USED FOR
LONG TERM RECEIVABLES 0.00 <72.17>
FURNITURE AND FIXTURES 0.00 <4,504.15>
MACHINERY AND EQUIPMENT <702.25> <24,012.27>
COMPUTER EQUIPMENT <1,096.90> <6,517.67>
TRADE SHOW EQUIPMENT 0.00 <3,369.35>
LEASEHOLD IMPROVEMENTS 0.00 <4,124.89>
CAPITAL LEASE EQUIPMENT 0.00 <14,707.50>
PROPERTY AND EQUIPMENT (NET) <20,004.24> <29,439.24>
INVESTMENT-REAL ESTATE 0.00 <2,106.46>
EXECUTIVE INSURANCE VALUE 0.00 <5,974.18>
--------------- ---------------
NET CASH USED IN INVESTING <21,803.39> <94,827.88>
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
PROCEEDS FROM
CAPITAL LEASE PAYABLE 0.00 17,607.75
COMMON STOCK 69.25 291.08
STOCK SUBSCRIBED 0.00 10.15
ADDITIONAL PAID IN CAPITAL 1,514,426.90 2,840,639.02
UNREALIZED HOLDING (GAIN)/LOSS 0.00 2,203.50
USED FOR
CAPITAL LEASE PAYABLE <1,905.30> <18,561.05>
STOCK SUBSCRIBED 0.00 <10.00>
ADDITIONAL PAID IN CAPITAL 0.00 <20,136.78>
UNREALIZED HOLDING (GAIN)/LOSS 0.00 <2,203.50>
--------------- ---------------
NET CASH USED IN FINANCING 1,512,590.85 2,819,840.17
--------------- ---------------
NET INCREASE <DECREASE> IN CASH $ <23,300.01> $ <747,701.13>
=============== ===============
SUMMARY
CASH BALANCE AT END OF PERIOD $ 32,304.10 $ 32,304.10
CASH BALANCE AT BEGINNING OF P <55,404.11> <776,426.57>
--------------- ---------------
NET INCREASE <DECREASE> IN CASH $ <23,100.01> $ <744,122.47>
=============== ===============
UNAUDITED - FOR INTERNAL USE ONLY.
ULTRA SHIELD PRODUCTS INT'L, INC.
STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
CURRENT MONTH YEAR TO DATE
SOURCES OF WORKING CAPITAL
NET INCOME $ 83,241.37 $ <848,082.21>
ADD BACK ITEMS NOT REQUIRING
WORKING CAPITAL
ACCUMULATED DEPRECIATION 13,900.00 41,700.00
----------------- ---------------
WORKING CAPITAL FROM OPERATIONS 97,141.37 <806,382.21>
OTHER SOURCES
FURNITURE AND FIXTURES 0.00 128.22
MACHINERY AND EQUIPMENT 200.00 1,104.72
COMPUTER EQUIPMENT 0.00 538.74
CAPITAL LEASE EQUIPMENT 0.00 1,707.50
CAPITAL LEASE PAYABLE 0.00 17,607.75
COMMON STOCK 69.25 291.08
STOCK SUBSCRIBED 0.00 10.15
ADDITIONAL PAID IN CAPITAL 1,514,426.90 2,840,639.02
UNREALIZED HOLDING (GAIN)/LOSS 0.00 2,203.50
----------------- ---------------
TOTAL SOURCES 1,611,837.52 2,057,848.47
----------------- ---------------
USES OF WORKING CAPITAL
LONG TERM RECEIVABLES 0.00 <72.17>
FURNITURE AND FIXTURES 0.00 <4,504.15>
MACHINERY AND EQUIPMENT <702.25> <24,012.27>
COMPUTER EQUIPMENT <1,096.90> <6,517.67>
TRADE SHOW EQUIPMENT 0.00 <3,369.35>
LEASEHOLD IMPROVEMENTS 0.00 <4,124.89>
CAPITAL LEASE EQUIPMENT 0.00 <14,707.50>
PROPERTY AND EQUIPMENT (NET) <20,004.24> <29,439.24>
INVESTMENT-REAL ESTATE 0.00 <2,106.46>
EXECUTIVE INSURANCE VALUE 0.00 <5,974.18>
CAPITAL LEASE PAYABLE <1,905.30> <18,561.05>
STOCK SUBSCRIBED 0.00 <10.00>
ADDITIONAL PAID IN CAPITAL 0.00 <20,136.78>
UNREALIZED HOLDING (GAIN)/LOSS 0.00 <2,203.50>
----------------- ---------------
TOTAL USES <23,708.69> <135,739.21>
----------------- ---------------
NET CHANGE $ 1,588,128.83 $ 1,922,109.26
================= ===============
ANALYSIS OF COMPONANTS OF CHANGES
INCREASE <DECREASE> IN CURRENT ASSETS
CASH ON HAND AND IN BANKS $ 0.00 $ <15.00>
CASH-CALIF STATE BANK-#001 4,622.53 <22,584.19>
PETTY CASH 0.00 450.00
CASH-UPLAND BANK <27,711.60> 9,654.14
CASH-SMITH BARNEY MONEY MKT <10.94> <81,648.25>
INVESTMENT-BONDS 0.00 <649,907.00>
ACCOUNTS RECEIVABLE 703,867.44 1,225,050.51
ALLOWANCE FOR BAD DEBTS 0.00 <5,325.00>
NOTES RECEIVABLE-OFFICERS 0.00 <38,614.03>
EMPLOYEE ADVANCES 771.69 5,143.31
NOTES RECEIVABLE-OTHERS 0.00 198,617.00
OFFICERS ADVANCES 0.00 517.00
COMMISSSION ADVANCES 0.00 500.00
INVENTORY-FINISHED GOODS <309,238.85> <184,736.12>
INVENTORY-PRODUCT <244.35> 26,221.10
INVENTORY-BOTTLES 552.36 <3,955.50>
INVENTORY-CAPS 0.00 <39,527.00>
INVENTORY-SPRAYERS <11.75> 38,659.75
INVENTORY-LABELS <43.00> 55,050.65
INVENTORY-DISPLAYS 0.00 <3,779.00>
INVENTORY-MISC. <953.29> 28,879.36
INVENTORY-TRAINING TAPES 0.00 <5,407.45>
INVENTORY-BLEND CTR COMPONETS 13,061.25 63,813.84
PREPAID EXPENSES 1,000,368.00 951,723.81
PREPAID- 3,085.00 19,213.90
PREPAID-ADVERTISTING <25,953.24> 0.00
MISC. & A/R OVERPMTS PAYABLES 0.00 <72.17>
<INCREASE> DECREASE IN CURRENT LIABILITIES
ACCOUNTS PAYABLE <93,128.07> <675,681.20>
ACCRUED INTEREST <9,068.40> <23,538.85>
FEDERAL INC TAX WITHHELD 0.00 35,323.41
FICA WITHHELD 0.00 10,328.83
FICA-EMPLOYER 0.00 7,314.66
STATE INC TAX WITHHELD 0.00 13,306.57
SDI WITHHELD 0.00 971.77
FUTA PAYABLE 0.00 <824.49>
SUI PAYABLE 0.00 <4,110.60>
ACCRUED EXPENSES 0.00 23,364.30
ACCRUED SALARIES & WAGES 11,868.78 11,868.78
SALES TAX PAYABLE <1,534.70> <8,394.71>
EMPLOYEE CREDIT UNION 0.00 <547.22>
NOTES PAYABLE-JAMGOTCHIAN 0.00 125,000.00
OFFICERS CREDIT LINE 0.00 1,878.83
NOTES PAYABLE-CONV. TO STOCK 324,500.00 824,825.00
UNEARNED DEPOSITS <6,500.00> <6,500.00>
SUSPENSE <170.03> <300.00>
----------------- ---------------
NET CHANGE $ 1,588,128.83 $ 1,922,208.74
================= ===============
FOR MANAGEMENT PURPOSES ONLY
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 32,376
<SECURITIES> 0
<RECEIVABLES> 1,255,654
<ALLOWANCES> (139,949)
<INVENTORY> 295,356
<CURRENT-ASSETS> 2,747,273
<PP&E> 149,927
<DEPRECIATION> 254,136
<TOTAL-ASSETS> 3,161,710
<CURRENT-LIABILITIES> 1,785,588<F1>
<BONDS> 0
0
0
<COMMON> 1,394
<OTHER-SE> 1,325,573
<TOTAL-LIABILITY-AND-EQUITY> 3,161,710
<SALES> 1,461,797
<TOTAL-REVENUES> 1,572,411
<CGS> 662,704
<TOTAL-COSTS> 2,420,493
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119,585
<INCOME-PRETAX> (849,682)
<INCOME-TAX> 1,600
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (848,082)
<EPS-PRIMARY> (.050)
<EPS-DILUTED> (.050)
<FN>
<F1>Notes payable to stockholders of $922,359 are convertible to units of common
stock at the option of the noteholders over various dates through March 31,
1998. On average 89% convert to stock.
</FN>
</TABLE>
