<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to _______________ .
COMMISSION FILE NUMBER 0-2686
QUADRATECH, INC.
----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 95-4396848
- ------------------------------------------------- -----------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
126 West Maple Avenue, Monrovia, California 91016
- ------------------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 626-358-5995
-------------------
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]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: At March 31, 1996, there were
outstanding 12,967,362 shares of the Registrant's Common Stock, $.001 par value.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE> 2
[HAROLD Y. SPECTOR LETTERHEAD]
To the Board of Directors
Quadratech, Inc.
Monrovia, California
I have compiled the accompanying consolidated balance sheets of Quadratech, Inc.
(a Nevada corporation) and its wholly-owned subsidiary, Oil Scavenger Absorbent,
Inc.(a California corporation), as of September 30, 1997 and 1996, and the
related consolidated statements of operations and accumulated deficit, and cash
flows for the nine months then ended, in accordance with Statements on Standards
for Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. I have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in the Note 7 to
the consolidated financial statements, the Company's significant operating
losses, working capital deficiency and deficit in stockholders' equity raise
substantial doubt about their abilities to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
[SIG]
Pasadena, California
June 24, 1998
<PAGE> 3
QUADRATECH, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 1997 and 1996
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Current Assets
Cash $ 7,045 $ 6,677
Account Receivables, net of allowance
for bad debt of $0 and $25,611 61,409 16,703
Other Receivables 30,599 26,259
Inventories 41,780 41,780
Prepaid Expenses 5,832 5,832
Deferred Income Taxes, current 0 10,667
------------ -----------
Total Current Assets 146,665 107,918
------------ -----------
Property and Equipment
Furniture and Equipment 82,702 82,702
Plant and Equipment 71,018 65,016
Motor Vehicles 21,531 21,531
Leasehold Improvements 74,401 74,401
------------ -----------
249,652 243,650
Less: Accumulated Depreciation (89,595) (39,939)
------------ ------------
Total Property and Equipment 160,057 203,711
------------ -----------
Other Assets
Patents, Marks and Copyrights, net of
accumulated amortization of $1,806
and $586 13,739 15,989
Deposits 26,626 26,087
Deferred Income Taxes, noncurrent 0 565,062
------------ -----------
Total Other Assets 40,365 607,138
------------ -----------
TOTAL ASSETS $ 347,087 $ 918,767
============ ===========
</TABLE>
See accompanying notes and accountant's report 2
<PAGE> 4
QUADRATECH, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 1997 and 1996
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Current Liabilities
Accounts Payable $ 138,517 $ 35,978
Accrued Expenses 54,524 162,900
Notes Payable, current portion 307,445 358,262
------------ -----------
Total Current Liabilities 500,486 557,140
------------ -----------
Long-Term Debt, net of current 102,000 0
------------ -----------
Total Liabilities 602,486 557,140
------------ -----------
Stockholders' Equity
Common Stock, $.001 par value,
50,000,000 shares authorized;
13,093,974 shares issued and
outstanding in 1997, and 13,557,322
shares in 1996 13,094 13,557
Paid-in Capital 2,316,679 1,864,940
Accumulated Deficit (2,585,172) (1,516,870)
------------ ------------
Total Stockholders' Equity (Deficit) (255,399) 361,627
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 347,087 $ 918,767
============ ===========
</TABLE>
See accompanying notes and accountant's report 3
<PAGE> 5
QUADRATECH, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICITS
For Nine Months ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
SALES $ 98,925 $ 80,294
Less: Discount Taken (1,343) (11,896)
------------ ------------
NET SALES 97,582 68,398
COST OF SALES - SCHEDULE A 75,283 58,320
------------ -----------
GROSS PROFIT 22,299 10,078
OPERATING EXPENSES - SCHEDULE B 289,913 545,174
------------ -----------
INCOME (LOSS) FROM OPERATIONS (267,614) (535,096)
------------ ------------
OTHER INCOME (EXPENSES)
Interest Income 227 554
Other Income 73,249 31,047
Depreciation and Amortization (27,411) (15,600)
Interest Expenses (14,719) (2,549)
Penalties - (1,950)
Officer's Salaries (39,196) (82,251)
------------ ------------
Total Other Income (Expenses) (7,850) (70,749)
------------ ------------
NET INCOME (LOSS) BEFORE TAXES (275,464) (605,845)
PROVISION FOR INCOME TAXES 800 800
------------ -----------
NET INCOME (LOSS) (276,264) (606,645)
ACCUMULATED DEFICITS
Beginning Balance (2,308,908) (910,225)
------------ ------------
Ending Balance $(2,585,172) $(1,516,870)
============ ============
NET (LOSS) PER SHARE $ (.021) $ (.044)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 13,093,974 13,929,253
============ ============
</TABLE>
See accompanying notes and accountant's report 4
<PAGE> 6
QUADRATECH, INC. & SUBSIDIARY
COST OF SALES
For Nine Months ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
SCHEDULE A
1997 1996
------------ -----------
<S> <C> <C>
COST OF SALES
Beginning Inventory $ 41,780 $ 8,748
Purchases 25,251 24,760
Production Salaries 48,730 63,414
Warehouse Supplies 243 -
Freight-in 1,059 3,178
------------ -----------
117,063 100,100
Less: Ending Inventory (41,780) (41,780)
------------ ------------
Total Cost of Sales $ 75,283 $ 58,320
============ ===========
</TABLE>
See accompanying notes and accountant's report 5
<PAGE> 7
QUADRATECH, INC. & SUBSIDIARY
OPERATING EXPENSES
For Nine Months ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
SCHEDULE A
1997 1996
------------ -----------
<S> <C> <C>
OPERATING EXPENSES
Accounting $ 5,898 $ 13,811
Advertising and Promotions 10,567 36,242
Bad Debt - 3,833
Bank and Finance Charges 5,803 4,220
Car Allowances and Expenses 3,609 3,878
Commissions 22,886 21,959
Contributions 74 550
Customer and Public Relations 6,260 17,146
Dues and Subscriptions 1,741 2,817
Employee Benefits 1,449 8,554
Entertainment 2,794 7,627
Equipment Rental 9,235 7,425
Freight and Postage 2,556 5,327
Insurance 5,841 38,477
Legal and Professional 16,517 47,744
Licenses & Permits - 1,665
Maintenance 14,562 28,547
Marketing Research - 38,501
Office Supplies 7,983 22,715
Operating Supplies 493 -
Outside Services 3,425 -
Other Expenses 1,709 3,693
Payroll Taxes 9,652 20,837
Rent 68,000 52,037
Research and Development 92 3,144
Royalties - 3,151
Salaries and Wages 32,616 45,691
Shipping 7,424 13,892
Supplies 250 -
Taxes - Property 694 3,225
Telephone 22,975 25,646
Trade Shows 6,487 22,340
Travel 1,797 23,658
Utilities 16,524 16,822
------------ -----------
Total Operating Expenses $ 289,913 $ 545,174
============ ===========
</TABLE>
See accompanying notes and accountant's report 6
<PAGE> 8
QUADRATECH, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months ended September 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (276,264) $ (606,645)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization 27,411 15,600
(Increase) Decrease in:
Accounts Receivable (39,743) (7,683)
Other Receivables (3,777) (20,109)
Inventory - (33,032)
Prepaid Expenses - (5,000)
Deposits (1,000) (5,325)
Increase (Decrease) in:
Accounts Payable 49,185 4,178
Accrued Expenses (73,971) (52,597)
------------ ------------
NET CASH (USED) BY OPERATING ACTIVITIES (318,159) (710,613)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Fixed Assets (6,002) (141,244)
Increase in Patents, Marks and Copyrights - (1,130)
NET CASH (USED) BY INVESTING ACTIVITIES (6,002) (142,374)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Stocks - 488,800
Increase in Paid-in Capital 132,500 -
Net Proceeds from Notes Payable 192,183 162,500
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 324,683 651,300
------------ -----------
NET INCREASE (DECREASE) IN CASH 522 (201,687)
BEGINNING OF YEAR 6,523 208,364
------------ -----------
END OF YEAR $ 7,045 $ 6,677
============ ===========
SUPPLEMENTAL DISCLOSURES:
Cash Paid During the Period for:
Interest $ - $ 309
============ ===========
Income Tax $ - $ 800
============ ===========
</TABLE>
Noncash investing and financing activities:
In 1996, $346,000 deposit was converted to common stock.
See accompanying notes and accountant's report 7
<PAGE> 9
QUADRATECH, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months ended September 30, 1997 and 1996
NOTE 1 - GENERAL
Quadratech, Inc. ("the Company") was formed under the laws of Nevada on
February 4, 1994.
Quadratech, Inc., and its wholly-owned subsidiary, Oil Scavenger Absorbent, Inc.
("OSA", a California corporation formed in August, 1993), was established to
offer significant solutions for certain major environmental problems from the
development and manufacturing a range of environmentally safe bio-degradable
products.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company uses the accrual basis of accounting in accordance with generally
accepted accounting principles.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, OSA, after elimination of all material
intercompany accounts and transactions.
Use of estimates
The preparation of the accompanying consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make certain estimates and assumptions that directly affect the results of
reported assets, liabilities, revenue, and expenses. Actual results may differ
from these estimates.
Cash Equivalents
The Company considers all highly liquid debt instruments with an original
maturity of Nine months or less to be cash equivalents. As of September
30, 1997 and 1996, there were no cash equivalents.
The Company prepares its consolidated statements of cash flows using the
indirect method as defined under Financial Accounting Standards Board Statement
No. 95.
Revenue Recognition
Revenue from sales is recognized when products are shipped and accepted by the
customer.
Accounts Receivable
The allowance for bad debts is based on management's evaluation of outstanding
accounts receivable at the end of each month. Bad debt expense for nine months
ended September 30, 1997 and 1996 was $0 and $3,833, respectively.
8
<PAGE> 10
QUADRATECH, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months ended September 30, 1997 and 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventories
Costs incurred for materials, technology and shipping are capitalized as
inventories and charged to cost of sales when revenue is recognized.
Inventories consist of finished goods and are stated at the lower of cost or
market, using the first-in, first-out method.
Property and Equipment
Property and Equipment are valued at cost. Maintenance and repair costs are
charged to expenses as incurred. Depreciation is computed on the straight-line
and accelerated methods based on the estimated useful lives of the assets.
Depreciation expense was $26,767 and $15,300 for 1997 and 1996, respectively.
Intangible Assets
Patents, marks and copyrights are capitalized and amortized over five Nine
Months using the straight-line method.
Research and Development
Research and development costs are expensed as incurred.
Income Taxes
The Company accounts income taxes in accordance with Financial Accounting
Standards Board Statement No. 109.
Reclassification
Certain reclassification have been made to the 1996 consolidated financial
statements to conform with the 1997 consolidated financial statement
presentation. Such reclassification had no effect on net loss as previously
reported.
NOTE 3 - NOTES PAYABLE
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
a.)Notes to Caprice Engine, interest
at 6% to 8% per annum, due on
demand; unsecured $ 165,657 $ 74,762
b.)Notes to Bill Synder, including
$100,000 LOC, interest at 6.75%
to 10.5% per annum, due on
demand; unsecured 119,500 121,000
</TABLE>
9
<PAGE> 11
QUADRATECH, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months ended September 30, 1997 and 1996
NOTE 3 - NOTES PAYABLE (Continued)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
c.)Note to David Comfort, interest
at 8 1/2% commencing 8/1/98;
unsecured; due on demand 17,788 -
d.)Note to Elizabeth Comfort,
unsecured; due on demand - 162,500
e.)Note to William Kroes, interest
at 10% per annum due from 3/1/98;
monthly installments of $420 from
3/15/98; due 5/31/99; unsecured 102,000 -
f.)Note to Frances Rigney, interest
only at 8 1/2% commencing 8/1/98;
unsecured; due on demand 4,500 -
---------- ----------
Total $ 409,445 $ 358,262
Less current maturities 307,445 358,262
---------- ----------
Long-term debt, net $ 102,000 $ 0
========== ==========
Maturities on notes payable are as follows:
December 31,
1997 $307,445
1998 0
1999 102,000
--------
$409,445
========
</TABLE>
NOTE 4 - ROYALTIES
The Company has a signed agreement with an officer/stockholder to a pay a
royalty of 4% on gross sales of oil absorbent material per year. In exchange for
the royalty, the Company acquired the patent on the oil absorbent material.
NOTE 5 - INCOME TAXES
The Company files consolidated federal and state income tax returns with its
subsidiary.
Provision for income taxes in the consolidated statements of operations for nine
months ended September 30, 1997 and 1996 consist of $800 minimum state income
taxes in each year.
10
<PAGE> 12
QUADRATECH, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months ended September 30, 1997 and 1996
NOTE 5 - INCOME TAXES (Continued)
As of December 31, 1996, the Company has federal net operating loss
carryforwards of $2,245,455, and California NOL of $2,189,259 to reduce future
taxable income. To the extent not utilized, both carryforwards will begin to
expire beginning 2000 and 1998 respectively.
NOTE 6 - RELATED PARTY TRANSACTIONS
As described in Note 3, the Company had various unsecured borrowings from the
stockholders.
NOTE 7 - GOING CONCERN
The accompanying consolidated financial statements are presented on the basis
that the Companies are going concerns. Going concern contemplates the
realization of assets and the satisfication of liabilities in the normal course
of business over a reasonable length of time. As shown in the accompanying
consolidated financial statements, the Company incurred a net loss of $276,264
and $606,645 for nine months ended September 30, 1997 and 1996, respectively,
and as of September 30, 1997, the Company has an accumulated deficit of
$2,585,172 a deficit in stockholders' equity of $255,399 and current liabilities
exceed current assets by $353,821.
Management is currently involved in active negotiations to obtain additional
financing and actively increasing marketing efforts to increase revenues. The
Company continued existence depends on its ability to meet its financing
requirements and the success of its future operations. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
11
<PAGE> 13
Item II. Management's Discussion and Analysis or Plan
Results of Operation.
For the current quarter, the Company focused on marketing its oil
absorbent products, together with its Flush-It(TM) litter to additional
superstore chains, animal supplies co-ops and to individual pet supplies stores
in the United States and Canada.
Selling, general and administrative costs decreased substantially as a
result of a reduction in personnel and decreased marketing costs associated with
the sale of products to its customers.
Liquidity and Capital Resources.
The liquidity of the Company and its available capital resources have
not improved.
The Company believes that internally generated funds and the sale and
issuance of stock for cash or in cancellation of indebtedness will provide
minimum capital resources to finance operations, fund capital expenditures and
planned research activities. The Company's need for funds has been reduced
predicated upon the significant reduction in property rental and maintenance
expenses and the reduction of marketing costs.
For the current quarter, the Company had no material commitments to
acquire additional assets.
<PAGE> 14
PART II
OTHER INFORMATION
<TABLE>
<S> <C>
Item 1 - Legal Proceedings....................................... None
Item 2 - Changes in the Rights of the Company's
Security Holders........................................ None
Item 3 - Defaults by the Company on its Senior
Securities.............................................. None
Item 4 - Results of Votes of Security Holders.................... None
Item 5 - Other Information....................................... None
Item 6 - Exhibits and Reports on Form 8-K........................ None
</TABLE>
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.
QUADRATECH, INC.
-----------------------------------
(Company)
Dated: June 29, 1998
By: /s/ MARIA COMFORT
-----------------------------------
Maria Comfort
President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,045
<SECURITIES> 0
<RECEIVABLES> 92,008
<ALLOWANCES> 0
<INVENTORY> 41,780
<CURRENT-ASSETS> 146,665
<PP&E> 249,652
<DEPRECIATION> 89,595
<TOTAL-ASSETS> 347,087
<CURRENT-LIABILITIES> 500,486
<BONDS> 0
0
0
<COMMON> 13,094
<OTHER-SE> (268,493)
<TOTAL-LIABILITY-AND-EQUITY> 347,087
<SALES> 23,963
<TOTAL-REVENUES> 77,505
<CGS> 19,895
<TOTAL-COSTS> 19,895
<OTHER-EXPENSES> 73,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,907
<INCOME-PRETAX> (15,580)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,580)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,580)
<EPS-PRIMARY> (.001)
<EPS-DILUTED> (.001)
</TABLE>
