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, 1998
Central Index Key #856572
Commission File Number: 33-31566
ULTRA SHIELD PRODUCTS INTERNATIONAL, INC.
Exact Name of Registrant as Specified in its Charter
Delaware 77-0219055
State or Other Jurisdiction of IRS Employer Identification
Incorporation or Organization 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, 24,685,884 shares of common stock; 23,402,622 Class A and
23,402,622 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 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,
1998 a total of 12,764,601 has been received from these financing activities.
At September 30, 1998, the Registrant had cash and cash equivalents totaling
32,192 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 1998 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 $185,200 through August, 1999,
the Registrant has no other known commitments for its capital resources as of
September 30, 1998. Management believes that cash available from ongoing
operations and, if necessary, from additional financing, will cover these
commitments.
The Registrant's total assets decreased from $714,302 at June 30, 1998,
to $709,211 at September 30, 1998. The decrease of $5,091 (.007%) was
primarily due to decreased of inventory and property and equipment, and an
increase in cash.
The Registrant's total liabilities decreased from $1,994,598 at June 30,
1998, to $1,990,897 at September 30, 1998. The decrease of $3,701 (.18%) was
primarily due to decrease in accounts payable.
The Registrant's accrued expenses increased from $525,824 at June 30,
1998, to $536,140 at September 30, 1998. The increase of $10,316 (1.92%) was
due to an increase in accrued sales tax and payable to officers.
The Registrant's accrued expenses increased from $6,500 at September
30, 1997 to $360,627 at December 31, 1998, to $536,140 at September 30, 1998.
Total increase of $354,127 (98.19%) and $175,513 (32.74%), respectively.
These increases were due primarily to accrued interest on notes, payroll and
related taxes, and anticipated legal expenses.
The Registrant's notes payable increased from $922,359 at September
30, 1997 to $1,033,242 at December 31, 1997, to $1,052,931 at September 30,
1998. Total increase of $110,883 (10.73%) and increase of $19,689 (1.87%),
respectively. These respective increases were due to (i) notes converted to
common stock or common stock subscribed as of June 30, 1997; and, (ii) the
accrual of certain services provided to the Registrant during the period.
The Registrant's accounts payable decreased from $750,550 at September
30, 1997 to $247,119 at December 31, 1998, to $397,112 at September 30, 1998.
Total decrease of $503,431 (67.07%) and increase of $149,993 (37.77%),
respectively. The increase was due to operating expenses for the periods,
increased inventory purchases.
The Registrant's accumulated deficit increased from $9,677,327 at
September 30, 1997 to $12,449,288 at December 31, 1998, to $13,198,798 at
September 30, 1998. Total increase of $2,771,961 (22.26%) and increase of
$749,510 (5.68%), respectively, as a result of increased net losses from
operations.
Since inception, the Registrant has experienced significant losses from
operations in each successive period. In the nine months ending September 30,
1998, as compared to the nine months ended September 30, 1997, net loss from
operations decreased $931,469 (55.41%), from $1,681,060 September 30, 1997 to
$749,591 September 30, 1998; gross sales of products increased $153,077
(38.69%) from $242,596 to $395,673; cost of product sales increased $37,878
(11.80%) from $283,171 to $321,049; selling, general and administrative
expenses decreased $788,324 (49.35%) from $1,597,328 to 809,004; and other
income and expenses decreased $27,945 (64.75%) from $43,156 to $15,211.
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 borrowings convertible to equity securities to improve its
liquidity while operations have been unable to generate adequate working
capital. Net cash used in operating activities for the six months ended June
30, 1998 was <$44,689.>.
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.
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: January 5, 1999 ULTRA SHIELD PRODUCTS INTERNATIONAL, INC.
By: /s/ Brent J. Humphrey
Brent J. Humphrey, President, Chief
Executive Officer and Chief Financial and
Accounting Officer
Ultra Shield Products Int'l, Inc.
Balance Sheet
September 30, 1998
ASSETS
Current Assets
Cash In Banks
$ 32,192.23
Accounts Receivable
70,362.63
Notes Receivable
61,429.43
Inventory
176,785.84
Prepaid Expenses
<4,542.03>
_________________
Current Assets
336,228.10
Property and Equipment
92,473.61
Other Assets
280,509.49
_________________
Total Assets $ 709,211.20
==================
LIABILITIES AND CAPITAL
Current Liabilities
$ 1,986,183.65
Long-Term Liabilities
4,713.34
_________________
Total Liabilities 1,990,896.99
Capital
Common Stock 2,468.35
Notes Reciv-Subscribers <1,000,000.00>
Additional Paid In
Capital 12,914,601.51
Retained Earnings
(Deficit) <12,449,206.37>
Net Income <749,549.28>
_________________
Total Capital <1,281,685.79>
__________________
Total Liabilities & Capital $ 709,211.20
==================
Ultra Shield Products Int'l, Inc.
Income Statement
For the Nine Months Ending September 30, 1998
Current Quarter Year to Date
Net Revenues $ 135,791.52 $ 395,960.46
Cost of Sales 104,450.97 321,049.40
Gross Profit 31,340.55 74,911.06
__________________ __________________
Total Expenses 228,924.97 824,460.34
__________________ __________________
Net Income $ <197,584.42> $ <749,549.28>
================== ==================
Ultra Shield Products Int'l, Inc.
Statement of Cash Flow
For the nine Months Ended September 30, 1998
Current Month Year to Date
Cash used in operating activities
Net Income $ <197,584.42> $ <749,549.28>
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation 14,880.00 44,640.00
Current assets 37,913.01 41,644.17
Current Liabilities 12,174.75 168,831.45
_________________ _________________
Total Adjustments 64,967.76 255,115.62
_________________ _________________
Net Cash provided by Operations <132,616.66> <494,433.66>
_________________ _________________
Cash Flows from investing activities
<141.59> <1,063.94>
_________________ _________________
Net cash used in investing <141.59> <1,063.94>
_________________ _________________
Cash Flows from financing activities
196,194.00 533,462.69
<15,876.04> <36,016.21>
_________________ _________________
Net cash used in financing 180,317.96 497,446.48
_________________ _________________
Net increase <decrease> in cash $ 47,559.71 $ 1,948.88
================= =================
Summary
Cash Balance at End of Period $ 32,192.23 $ 32,192.23
Cash Balance at Beginning of P 20,416.23 <29,321.00>
_________________ _________________
Net Increase <Decrease> in Cash $ 52,608.46 $ 2,871.23
================= =================
Ultra Shield Products Int'l, Inc.
Statement of Changes in Financial Position
For the nine months ended September 30, 1998
Current Month Year To Date
Sources of Working Capital
Net Income $ <197,584.42> $ <749,549.28>
Add back items not requiring
working capital
Depreciation 14,880.00 44,640.00
_________________ _________________
Working capital from operations <182,704.42> <704,909.28>
Other sources
Sale of old equipment 196,194.00 534,385.04
_________________ _________________
Total sources 13,489.58 <170,524.24>
_________________ _________________
Uses of working capital
Equipment purchase <16,017.63> <37,080.15>
_________________ _________________
Total uses <16,017.63> <37,080.15>
_________________ _________________
Net change $ <2,528.05> $ <207,604.39>
================= =================
Analysis of componants of changes
Increase <Decrease> in Current
Assets
Stock repurchases $ 9,646.70 $ <38,772.94>
<Increase> Decrease in Current
Liabilities
Stock repurchases <12,174.75> <168,831.45>
_________________ _________________
Net change $ <2,528.05> $ <207,604.39>
================= =================
ULTRA SHIELD PRODUCTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR QUARTER ENDING SEPTEMBER 30, 1998
Common Stock Additional
Common Stock Subscribed Paid-in
Shares Amount Shares Amount Capital
Balance, June 30, 1998 23,743,486 2,374 0 0 12,718,501
Shares issued for
common stock subscribed 0
cash 177,551 18 46,100
services rendered 14,979 1
notes payable 641,113 64
in lieu of interest 108,755 11
Shares canceled 0
Shares reacquired 0
Unrealized loss on
investments
Net loss
Balance, September 30, 1998 24,685,884 2,468 0 0 12,764,601
ULTRA SHIELD PRODUCTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (Continued)
FOR QUARTER ENDING SEPTEMBER 30, 1998
Unrealized Note
Holding Receivable
Loss on from
Investments Stockholder
Balance, June 30, 1998 0 (1,000,000)
Shares issued for
common stock subscribed
cash
services rendered
notes payable
in lieu of interest
Shares canceled
Shares reacquired
Unrealized loss on
investments
Net loss
Balance, September 30, 1998 0 (1,000,000)
ULTRA SHIELD PRODUCTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (Continued)
FOR QUARTER ENDING SEPTEMBER 30, 1998
Accumulated
Deficit Total
Balance, June 30, 1998 (12,980,461) (1,259,585)
Shares issued for 0
common stock subscribed 0
cash 46,118
services rendered 1
notes payable 64
in lieu of interest 11
Shares canceled 0
Shares reacquired 0
Unrealized loss on
investments 0
Net loss (167,390) (167,390)
Balance, September 30, 1998 (13,147,851) (1,380,781)
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<PERIOD-END> SEP-30-1998
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<COMMON> 2,510
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