<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 1, 1999
QUADRATECH, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 0-26856 95-4396848
-------------- ----------- -------------
State or other (Commission IRS Employer
jurisdiction File Number) Identification
incorporation No.)
300 North Baldwin Park Boulevard
City of Industry, California 91746
---------------------------------------
(Address of principal executive offices)
(626) 333-2060
---------------------------------------------------
(Registrant's telephone number, including area code)
126 West Maple Avenue
Monrovia, California 91016
----------------------------
(Former Address of Registrant)
<PAGE> 2
Item 1. Changes in Control of Registrant.
Predicated upon the closing of an acquisition by the Registrant, as
described in Item 2 below, there has been a change in control of Registrant.
Craig G. Robitaille, Lloyd D. Smithson and Michael J. Oliva acquired control in
connection with the change of stock which occurred pursuant to a closing which
occurred on or about October 1, 1999.
There are no arrangements or understandings among members of both the
former and new control groups and their associates with respect to election of
directors or other matters.
Item 2. Acquisition or Disposition of Assets.
There was a closing which occurred on or about October 1, 1999,
pursuant to that certain Plan and Agreement of Reorganization entered into as of
April 1, 1999, by and between Accu Chem Conversion, Inc., a California
corporation ("Accu Chem"), certain of its shareholders and Registrant. The Plan
and Agreement of Reorganization contemplated that Registrant would acquire not
less than 80% of the issued and outstanding shares of Accu Check Common Stock
owned by its shareholders in exchange for the issuance of additional shares of
stock in Registrant. As at the closing, 15,000,000 shares of Registrant's stock
was issued in exchange for 83.3% of the issued and outstanding shares of stock
of Accu Chem. Accu Chem performs quality analysis and inspections on flight
sensitive materials for the aerospace industry, leases or operates rail
unloading locations at facilities located in the City of Industry, California
and Calipatria, California and provides rail and truck transportation of
"in-bond" cargo shipments from Calexico, Mexico to Menlo Park, California on a
contract basis. See Item 7, Exhibit (c) for a copy of the Plan and Agreement of
Reorganization.
As at the closing, Craig G. Robitaille and Lloyd D. Smithson were
directors of Registrant. All material facts as to the transaction and as to each
of said directors other directorship and affiliations were fully disclosed or
known to the Board of Directors and the Board of Directors authorized, approved
and ratified the agreement and transaction in good faith by sufficient vote in
favor of the transaction. Craig G. Robitaille and Lloyd D. Smithson abstained
from voting. The Board of Directors of Registrant believes that the contract and
transaction is just and reasonable as to Registrant at the time it was
authorized, approved or ratified and as at the date of the closing.
Registrant issued 15,000,000 shares as at October 1, 1999 and said
shares were registered as follows:
<TABLE>
<S> <C>
Craig G. or Michael A. Robitaille 5,000,000
Lloyd D. or Barbara E. Smithson 5,000,000
Michael J. Oliva and Margaret A.
Oliva, Trustees of the Oliva
Family Trust Est. 9-9-97 5,000,000
</TABLE>
<PAGE> 3
Item 5. Other Events.
(a) Registrant has moved its principal executive offices from 126 West
Maple Avenue, Monrovia, California 91016 to 300 North Baldwin Park Boulevard,
City of Industry, California 91746.
(b) On October 8, 1999, effective as of October 1, 1999, Craig G.
Robitaille was selected as President of Registrant. Perry Cope was selected as
Chairman of the Board of Directors.
(c) On October 8, 1999, Michael Montgomery resigned as a director of
Registrant. Michael Montgomery will continue to act as legal counsel for
Registrant. The vacancy created by the resignation of Michael Montgomery was
filled by the appointment of Michael J. Oliva. Michael J. Oliva and Margaret A.
Oliva are Trustees of the Oliva Family Trust of September 9, 1997, a shareholder
of Registrant and a former shareholder of Accu Chem Conversion, Inc.
(d) Registrant, giving effect to the transaction described in Item 2
above, has one wholly owned subsidiary (Oil Scavenger Absorbent, Inc.) and 83.3%
owned subsidiary (Accu Chem Conversion, Inc.).
Item 7. Financial Statements and Exhibits.
The following financial statements, proforma financial information and
exhibits are filed as a part of this report.
(a) Financial Statements of Accu Chem Conversion, Inc. as of June 30,
1999.
(b) Financial Statements of Registrant as of June 30, 1999.
(c) Proforma Financial Statements give the effect to the transaction.
(d) Plan and Agreement of Reorganization by and between Accu Chem
Conversion, Inc., certain of its shareholders and Registrant.
SIGNATURES
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 hereunto duly authorized.
QUADRATECH, INC.
(Registrant)
/s/ CRAIG G. ROBITAILLE
DATED: October 22, 1999 -----------------------------
Craig G. Robitaille,
President
<PAGE> 4
To the Board of Directors
Accu Chem Conversion, Inc.
City of Industry, California
I have compiled the accompanying balance sheet of Accu Chem Conversion, Inc., as
of June 30, 1999, and the related statements of income, retained earnings, and
cash flows for the three and six 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.
Pasadena, CA
September 3, 1999
<PAGE> 5
ACCU CHEM CONVERSION, INC.
BALANCE SHEET
June 30, 1999
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current Assets
Cash $ 3,494
Account Receivables 378,921
Employee Advance 7,557
Inventory 132,619
Prepaid Expenses 160,430
-----------
Total Current Assets 683,021
-----------
Property and Equipment
Automotive Equipment 500,987
Office Equipment 11,232
Terminal Equipment 213,062
Leasehold Improvements 278,585
-----------
1,003,866
Less: Accumulated Depreciation (346,226)
-----------
Total Property and Equipment 657,640
-----------
Other Assets
Organizational Costs 315
Reimburseable Charges 11,385
Deposits 13,882
-----------
Total Other Assets 25,582
-----------
TOTAL ASSETS $ 1,366,243
===========
</TABLE>
See accompanying notes and account's report
2
<PAGE> 6
ACCU CHEM CONVERSION, INC.
BALANCE SHEET
June 30, 1999
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
Current Liabilities
Accounts Payable $ 235,552
Accrued Expenses 249,861
Income Tax Payable 37,403
Deferred Tax Payable 23,082
Notes Payable, current portion 193,374
----------
Total Current Liabilities 739,272
----------
Long-Term Debt, net of current 445,542
----------
Total Liabilities 1,184,814
----------
Stockholders' Equity
Common Stock, $3 stated value, 1,000,000
shares authorized; 6,000 shares issued and
outstanding 18,000
Paid-in Capital 16,000
Retained Earnings 147,429
----------
Total Stockholders' Equity 181,429
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,366,243
==========
</TABLE>
See accompanying notes and account's report
3
<PAGE> 7
ACCU CHEM CONVERSION, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
For Three and Six Months ended June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months
ended Year To
June 30, 1999 Date
------------- -----------
<S> <C> <C>
SALES $ 755,462 $ 1,425,087
Less: Discount Allowed (666) (2,502)
--------- -----------
NET SALES 754,796 1,422,585
COST OF SALES - SCHEDULE A 87,649 252,434
--------- -----------
GROSS PROFIT 667,147 1,170,151
OPERATING EXPENSES - SCHEDULE B 528,949 952,339
--------- -----------
INCOME FROM OPERATIONS 138,198 217,812
--------- -----------
OTHER INCOME (EXPENSES)
Interest Income 16 82
Rental Income 17,000 33,500
Depreciation and Amortization (26,364) (51,035)
Interest Expenses (14,789) (26,972)
Officer's Salaries (37,043) (64,610)
--------- -----------
Total Other Income (Expenses) (61,180) (109,035)
--------- -----------
NET INCOME (LOSS) BEFORE TAXES 77,018 108,777
PROVISION FOR INCOME TAXES 29,998 39,907
--------- -----------
NET INCOME (LOSS) 47,020 68,870
RETAINED EARNINGS
Beginning Balance 100,409 78,559
--------- -----------
Ending Balance $ 147,429 $ 147,429
========= ===========
</TABLE>
See accompanying notes and account's report
4
<PAGE> 8
ACCU CHEM CONVERSION, INC.
COST OF SALES
For Three and Six Months ended June 30, 1999
(Unaudited)
SCHEDULE A
<TABLE>
<CAPTION>
Three Months
ended Year To
COST OF SALES June 30, 1999 Date
------------- ---------
<S> <C> <C>
Beginning Inventory $ 151,948 $ 141,664
Purchases 68,320 243,389
--------- ---------
220,268 385,053
Less: Ending Inventory (132,619) (132,619)
--------- ---------
Total Cost of Sales $ 87,649 $ 252,434
========= =========
</TABLE>
See accompanying notes and account's report
5
<PAGE> 9
ACCU CHEM CONVERSIONS, INC.
OPERATING EXPENSES
For Three and Six Months ended June 30, 1999
(Unaudited)
SCHEDULE B
<TABLE>
<CAPTION>
Three Months
ended Year To
OPERATING EXPENSES June 30, 1999 Date
------------- ----------
<S> <C> <C>
Advertising $ 150 $ 400
Auto and Truck 33,849 70,688
Bad Debts -- 250
Commissions -- 6,173
DMV Fees 7,731 15,512
Freight 1,680 7,520
Fuel 19,806 35,483
Insurance 43,564 89,558
Legal and Professional 9,600 10,791
Licenses & Permits 1,059 1,273
Office Supplies 4,731 8,220
Owner Operators 89,333 122,199
Postage 121 121
Rent 46,812 87,635
Repair and Maintenance 29,908 35,559
Safety 1,756 2,743
Salaries and Wages 159,483 297,749
Sales Promotion 731 1,576
Supplies and Tools 65 1,258
Taxes - Payroll 15,751 34,803
Taxes - Property 453 453
Telephone 6,965 15,234
Terminal 24,981 46,746
Tire 14,000 23,480
Travel 3,093 4,351
Utilities 12,999 31,436
Weight Fees 328 1,128
-------- --------
Total Operating Expenses $528,949 $952,339
======== ========
</TABLE>
See accompanying notes and account's report
6
<PAGE> 10
ACCU CHEM CONVERSION, INC.
STATEMENT OF CASH FLOWS
For Three and Six Months ended June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months
ended Year To
June 30, 1999 Date
------------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 47,020 $ 68,870
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization 26,364 51,035
(Increase) Decrease in:
Accounts Receivable (70,895) (35,850)
Employee Advance (615) (2,535)
Inventory 19,329 9,045
Prepaid Expenses (89,383) (62,858)
Reimburseable Charges (250) (11,385)
Deposits (2,310) (8,582)
Increase (Decrease) in:
Accounts Payable (74,471) (110,324)
Accrued Expenses 109,519 86,169
Income Tax Payable 29,998 37,403
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES (5,694) 20,988
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment (36,712) (99,398)
--------- ---------
NET CASH (USED) BY INVESTING ACTIVITIES (36,712) (99,398)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Proceeds from Notes Payable 34,806 84,000
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 34,806 84,000
--------- ---------
NET INCREASE (DECREASE) IN CASH (7,600) 5,590
BEGINNING OF PERIOD 11,094 (2,096)
--------- ---------
END OF PERIOD $ 3,494 $ 3,494
========= =========
SUPPLEMENTAL DISCLOSURES:
Cash Paid During the Period for:
Interest $ 11,828 $ 21,323
========= =========
Income Tax $ 0 $ 2,504
========= =========
</TABLE>
See accompanying notes and account's report
7
<PAGE> 11
ACCU CHEM CONVERSION, INC.
STATEMENT OF CASH FLOWS (Continued)
For Three and Six Months ended June 30, 1999
(Unaudited)
SUPPLEMENTAL DISCLOSURES: (Continued)
Noncash investing and financing activities:
The Company converted a note payable of $25,000 into 1,666 2/3 shares of
common stock.
A note payable of $19,919 is accrued for the purchase of an equipment.
See accompanying notes and account's report
8
<PAGE> 12
ACCU CHEM CONVERSION, INC.
NOTES TO FINANCIAL STATEMENTS
For Three and Six Months ended June 30, 1999
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Presentation of Interim Information
In the Opinion of the management of Accu Chem Conversion, Inc. (the Company),
the accompanying unaudited financial statements include all normal adjustments
considered necessary to present fairly the financial positions as of June 30,
1999, and the results of operations and cash flows for the three months and six
months then ended. Interim results are not necessarily indicative of results for
a full year.
Use of estimates
The preparation of the accompanying 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 three months or less to be cash equivalents. As of June 30, 1999,
there were no cash equivalents.
The Company prepares its statement 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.
Accounts Receivable
The Company has not established an allowance for doubtful accounts and does not
use reserve method for recognizing bad debts. Bad debts are treated as direct
write-offs in the period management determines that collection is not probable.
Bad debt expense for three and six months ended June 30, 1999 was $0 and $250,
respectively.
Inventory
Inventory is stated at cost with cost determined by the gross profit margin
method.
9
<PAGE> 13
ACCU CHEM CONVERSION, INC.
NOTES TO FINANCIAL STATEMENTS
For Three and Six Months ended June 30, 1999
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 for three and six months ended June 30, 1999 was $26,364
and $51,035, respectively.
Income Taxes
The Company accounts income taxes in accordance with Financial Accounting
standards Board Statement No. 109.
NOTE 2 - NOTES PAYABLE
As of June 30, 1999, Notes Payable consist of the following:
<TABLE>
<CAPTION>
<S> <C>
a.) Operating line of credit from Bank of America
due annually, with interest at bank reference
rate plus 2.35% points with a maximum amount of
$85,000, secured by all Company assets $ 85,000
b.) Payable to a related party, monthly
payment of $444.89, including interest
at 12% per annum, secured by all
Company assets 9,703
c.) Payable to Holtrachem, monthly payment
of $506.19, including interest at 8%
per annum, due October, 2000, secured
by automotive equipment 27,408
d.) Payable to Bank of America, monthly
payments of $5,395.00, including interest
at 9% per annum, due March 2004, secured
by all Company assets 251,739
e.) Payable to Western St. Chem, monthly
payments of $865.26, including interest
at 7% per annum, due June 30, 1999,
secured by all Company assets 2,468
</TABLE>
10
<PAGE> 14
ACCU CHEM CONVERSION, INC.
NOTES TO FINANCIAL STATEMENTS
For Three and Six Months
ended June 30, 1999
(Unaudited)
NOTE 2 - NOTES PAYABLE (Continued)
<TABLE>
<S> <C>
f.) Payable to a related party, interest
at 7% per annum, due December 31, 2008
secured by all Company assets 172,283
g.) Payable to a stockholder, interest
at 10% per annum, due on demand,
secured by all Company assets 9,400
h.) Payable to a stockholder, interest
at 10% per annum, due on demand,
secured by all Company assets 10,996
i.) Payable to a related party, no
interest accrued, due on demand 50,000
j.) Payable to a Vendor, commencing
October 1, 1999, secured by equipment 19,919
---------
$ 638,916
Less current maturities (193,374)
---------
Long-term debt, net $ 445,542
=========
</TABLE>
Maturities on notes payable are as follows:
<TABLE>
<CAPTION>
December 31,
------------
<S> <C>
1999 $ 193,374
2000 70,950
2001 50,441
2002 55,172
2003 and over 268,979
---------
$ 445,542
=========
</TABLE>
NOTE 3 - INCOME TAXES
As of June 30, 1999, income tax provision is comprised of the following:
<TABLE>
<S> <C>
Federal Tax $ 30,302
State Tax 9,605
---------
$ 39,907
=========
</TABLE>
11
<PAGE> 15
ACCU CHEM CONVERSION, INC.
NOTES TO FINANCIAL STATEMENTS
For Three and Six Months
ended June 30, 1999
(Unaudited)
NOTE 3 - INCOME TAXES (Continued)
Deferred income taxes are provided on temporary difference between book and tax
income, arising primarily from the recognition of contingency loss. (See Note 5)
The Company has a federal net operating loss carryforward of $66,807 which will
expire in 2017.
NOTE 4 - RELATED PARTY TRANSACTIONS
As described in Note 2, the Company had various unsecured borrowings from the
stockholders and various related parties.
NOTE 5 - CONTINGENCIES AND COMMITMENTS
Employment Agreements
The Company has five-year employment agreements with two officers that provide
for aggregate annual compensation of $141,600 for the first three years, and
$173,600 for the final two years. The agreements expire on February 28, 2011,
with an option to extend the agreements by two (2) additional five year periods.
Under the agreements, the officers are entitled to an annual bonus of six
percent (6%) of the gross profits when the Company's gross sales exceed $2.8
million annually. In addition, each officer will receive car allowance of $600
per month. The agreements may be terminated by the Company or the officers with
notice 60 days prior to any expiration date.
Litigation
In November 1997, the Company involved in a pending litigation of a traffic
accident by its driver and a third party. The Company was sued for a punitive
damage of $150,000. The ultimate resolution of this litigation is not
ascertainable at this time. No provision has been made in the financial
statements related to this claim. However, the Company had accrued the loss in
the 1997 income tax return; as a result, deferred income tax is provided for the
difference. (See Note 3)
In June 1999, the litigation was settled. The total amount paid was $37,500,
which will be borne by the insurance carrier. The Company will adjust the
$150,000 contingency loss in 1999 operations.
12
<PAGE> 16
ACCU CHEM CONVERSION, INC.
NOTES TO FINANCIAL STATEMENTS
For Three and Six Months ended June 30, 1999
(Unaudited)
NOTE 5 - CONTINGENCIES AND COMMITMENTS (Continued)
Lease Commitments
a.) The Company leases office and terminal facilities for $4,000 per month
from a related party, on a month-to-month basis. The Company is
negotiating for a five-year lease term.
b.) The Company also leases a warehouse & rail spur sites for the sum of
$6,000 per month, on a month-to-month basis. The Company subleases its
warehouse for $5,500 per month. Rental income for Three and Six months
ended June 30, 1999 was $16,500. The shareholders are purchasing the
facility and will lease back to the Company.
c.) In addition, the Company leases another rail facility and office space
for the greater of $4,000 per month or the product of $1.25 multiplied
by its shipped weights in excess of 4,000 tons, under a non-cancelable
operating lease for five years. The lease will expire in March, 2000.
The Company is negotiating another five-year lease term.
Total rent expense for three and six months ended June 30, 1999 was $46,812 and
$87,635, respectively.
Minimum rental payments as of June 30, 1999 are as follows:
<TABLE>
<S> <C>
1999 $ 24,000
2000 12,000
--------
$ 36,000
========
</TABLE>
Payroll Tax Liability
The officers of the Company negotiated the prior years' payroll tax assessment
with IRS. The total amount, including penalties and interest, of $86,064 is
being forgiven.
NOTE 6 - MERGE
The Company is negotiating a merger. The Company will sell 83.33% shares of its
outstanding and issued common stock for 15,000,000 shares of common stock of
Quadratech, Inc. This transaction will be accounted for as a purchase, with the
assets and liabilities assumed recorded at book values.
13
<PAGE> 17
ACCU CHEM CONVERSION, INC.
NOTES TO FINANCIAL STATEMENTS
For Three and Six Months ended June 30, 1999
(Unaudited)
NOTE 7 - YEAR 2000
The Company believes that it has identified each of its computer systems that
will require modifications to enable it to perform satisfactorily on and after
January 1, 2000. The financial impact of making such modifications to the
Company's systems is not expected to be material to the Company's financial
position or results of operations. In addition, the Company is currently
corresponding with vendors that provide products and systems to the Company in
order to determine if such products and systems will be required to be upgraded
or replaced. Although management believes the Company has an adequate program in
place to address the Year 2000 issue, the costs of upgrades to, or replacements
of, its purchased products or systems has not been determined and there can be
no assurance that the program will ultimately be successful.
14
<PAGE> 18
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 June 30, 1999, and the related
consolidated statements of operations and accumulated deficit for the three and
six months ended June 30, 1999 and 1998, and cash flows for the three months
ended June 30, 1999 and 1998, 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 9 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.
I have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1998, and the
related consolidated statements of income, stockholders' equity and cash flows
for the year then ended (not presented herein.) In my report dated February 8,
1999, I expressed an unqualified opinion on those consolidated financial
statements. In my opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1998, is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
Pasadena, California
August 27, 1999
<PAGE> 19
QUADRATECH, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1999 1998
---------- ------------
<S> <C> <C>
Current Assets
Cash $ 15,314 $ 12,261
Account Receivables 11,788 36,528
Inventories 3,838 3,838
--------- ---------
Total Current Assets 30,940 52,627
--------- ---------
Property and Equipment
Furniture and Equipment 86,871 84,502
Plant and Machinery 66,900 66,900
Motor Vehicles 8,818 8,818
--------- ---------
162,589 160,220
Less: Accumulated Depreciation (117,576) (105,450)
--------- ---------
Total Property and Equipment 45,013 54,770
--------- ---------
Other Assets
Patents, Marks and Copyrights, net of
accumulated amortization of $3,323
and $2,878, respectively 12,692 12,667
Deposits 6,825 6,825
--------- ---------
Total Other Assets 19,517 19,492
--------- ---------
TOTAL ASSETS $ 95,470 $ 126,889
========= =========
</TABLE>
See Accompanying Notes and Accountant's Report
2
<PAGE> 20
QUADRATECH, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
<S> <C> <C>
Current Liabilities
Accounts Payable $ 2,314 $ 14,248
Accrued Expenses 517 3,567
Notes Payable, current Portion 144,500 316,500
----------- -----------
Total Current Liabilities 147,331 334,315
----------- -----------
Long-Term Liabilities
Long-term debt 43,500 50,500
----------- -----------
Total Liabilities 190,831 384,815
----------- -----------
Stockholders' Equity (Deficit)
Common Stock, $.001 par value, 50,000,000
shares authorized; 21,513,301 shares
issued and outstanding in 1999, and
18,611,228 shares in 1998 21,513 18,611
Paid-in Capital 3,239,245 2,891,707
Accumulated Deficit (3,356,119) (3,168,244)
----------- -----------
Total Stockholders' Equity (Deficit) (95,361) (257,926)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 95,470 $ 126,889
=========== ===========
</TABLE>
See Accompanying Notes and Accountant's Report
3
<PAGE> 21
QUADRATECH, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SALES $ 17,249 $ 12,438 $ 35,953 $ 28,227
Less: Discount Taken -- (507) -- (907)
------------ ------------ ------------ ------------
NET SALES 17,249 11,931 35,953 27,320
COST OF SALES - SCHEDULE A 10,171 11,407 30,395 25,763
------------ ------------ ------------ ------------
GROSS PROFIT 7,078 524 5,558 1,557
OPERATING EXPENSES - SCHEDULE B 44,055 54,538 103,854 121,349
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS (36,977) (54,014) (98,296) (119,792)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSES)
Interest Income -- 13 -- 32
Other Income 10,250 47 10,273 47
Depreciation and Amortization (6,304) (7,308) (12,571) (14,616)
Interest Expenses (1,253) (6,453) (2,513) (11,915)
Penalties and Late Charges (242) (58) (2,058) (58)
Recovery from Cash Embezzlement -- 900 -- --
Sales Tax - Prior Years -- -- (2,000) --
Officer's Life Insurance (1,470) -- (1,470) --
Officer's Salaries -- (10,250) (10,000) (16,250)
Officer's Salaries - Backpay -- -- (68,440) --
------------ ------------ ------------ ------------
Total Other Income (Expenses) 981 (23,109) (88,779) (42,760)
------------ ------------ ------------ ------------
NET INCOME (LOSS) BEFORE TAXES (35,996) (77,123) (187,075) (162,552)
PROVISION FOR INCOME TAXES -- -- 800 800
------------ ------------ ------------ ------------
NET INCOME (LOSS) (35,996) (77,123) (187,875) (163,352)
ACCUMULATED DEFICIT
Beginning Balance (3,320,123) (2,938,030) (3,168,244) (2,850,622)
Prior Year Adjustment -- -- -- (1,179)
------------ ------------ ------------ ------------
Ending Balance $ (3,356,119) $ (3,015,153) $ (3,356,119) $ (3,015,153)
============ ============ ============ ============
Loss Per Share - Primary $ (0.0017) $ (0.0053) $ (0.0093) $ (0.0111)
============ ============ ============ ============
Weighted Average Shares
Outstanding 21,513,301 14,472,699 20,269,555 14,726,699
============ ============ ============ ============
</TABLE>
See Accompanying Notes and Accountant's Report
4
<PAGE> 22
QUADRATECH, INC. & SUBSIDIARY
COST OF SALES
(Unaudited)
SCHEDULE A
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
COST OF SALES 1999 1998 1999 1998
------- ------- -------- --------
<S> <C> <C> <C> <C>
Beginning Inventory $ 3,838 $ 3,838 $ 3,838 $ 3,838
Purchases 2,344 3,405 9,169 9,320
Production Labor 7,245 7,909 17,287 15,522
Warehouse Supplies 582 93 3,939 921
------- ------- ------- -------
14,009 15,245 34,233 29,601
Less: Ending Inventory 3,838 3,838 3,838 3,838
------- ------- ------- -------
Total Cost of Sales $10,171 $11,407 $30,395 $25,763
======= ======= ======= =======
</TABLE>
See Accompanying Notes and Accountant's Report
5
<PAGE> 23
QUADRATECH, INC. & SUBSIDIARY
OPERATING EXPENSES
(Unaudited)
SCHEDULE B
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
OPERATING EXPENSES 1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Accounting $ 1,050 $ 5,440 $ 10,250 $ 17,440
Advertising 285 -- 480 1,600
Bank and Finance Charges 22 452 166 975
Car Allowance and Expenses 2,099 4,230 4,430 6,125
Commissions 1,300 1,520 2,500 2,620
Consulting 15,000 12,000 23,000 22,950
Customers & Public Relations -- 11 -- 11
Directors' Meetings 55 370 55 560
Dues and Subscriptions 100 245 100 245
Entertainment 840 674 1,447 1,110
Equipment Rental -- 40 77 161
Freight & Postage 129 85 431 134
Insurance 5,824 3,666 10,581 9,102
Legal and Professional 1,435 2,369 4,303 4,538
Legal Settlement -- -- 5,136 --
Licenses & Permits 10 110 95 365
Maintenance 600 515 705 2,366
Office Supplies 687 566 1,437 2,106
Other Expenses 37 (54) 37 486
Outside Service 320 1,600 320 2,510
Parking 94 -- 142 --
Payroll Taxes 1,670 2,450 4,857 5,101
Printing and Reproduction -- 123 -- 123
Rent 728 2,184 2,912 4,984
Research and Development -- -- -- 600
Salaries and Wages 6,240 8,036 14,500 16,792
Selling Expenses -- -- -- 90
Shipping 1,168 351 2,743 2,331
Supplies 89 97 89 97
Taxes - Property -- 1,444 1,478 1,444
Telephone 2,499 2,485 5,816 7,984
Trade Shows -- 932 57 1,812
Travel 1,077 1,823 4,023 2,305
Utilities 697 774 1,687 2,282
------- -------- -------- --------
Total Operating Expenses $44,055 $ 54,538 $103,854 $121,349
======= ======== ======== ========
</TABLE>
See Accompanying Notes and Accountant's Report
6
<PAGE> 24
QUADRATECH, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(187,875) $(163,352)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and Amortization 12,571 14,616
Prior Year adjustments -- (1,179)
Issuance stocks for backpay salaries 68,440 --
(Increase) Decrease in:
Accounts Receivable 24,740 2,273
Other Receivable -- 2,000
Deposits -- (1,200)
Increase (Decrease) in:
Accounts Payable (11,934) (32,429)
Accrued Expenses (3,050) (1,231)
--------- ---------
NET CASH (USED) BY OPERATING ACTIVITIES (97,108) (184,502)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment (2,369) --
Increase in Intangible Assets (470) --
--------- ---------
NET CASH (USED) BY INVESTING ACTIVITIES (2,839) --
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercising stock options 90,000 --
Net Payments to Notes Payable (7,000) --
Net Proceeds from Notes Payable 20,000 143,000
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 103,000 143,000
--------- ---------
NET INCREASE (DECREASE) IN CASH 3,053 (41,502)
BEGINNING OF PERIOD 12,261 49,600
--------- ---------
END OF PERIOD $ 15,314 $ 8,098
========= =========
SUPPLEMENTAL DISCLOSURES:
Cash Paid During the Period for:
Interest $ 2,513 $ 1,829
========= =========
Income Tax $ 800 $ 0
========= =========
</TABLE>
See Accompanying Notes and Accountant's Report
7
<PAGE> 25
QUADRATECH, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Six Months Ended June 30, 1999 and 1998
SUPPLEMENTAL DISCLOSURES: (Continued)
Noncash investing and financing activities:
(a.) Convert note payable of $192,000 to 1,200,000 shares of common
stock.
(b.) Grant 100,000 shares of common stock to a new Board of Director
and 500,000 shares to the Company's president.
(c.) Issue common stock to the former president for her backpay
salaries of $68,440.
See Accompanying Notes and Accountant's Report
8
<PAGE> 26
QUADRATECH, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRESENTATION OF INTERIM INFORMATION
In the Opinion of the management of Quadratech, Inc. & Subsidiary (the Company),
the accompanying unaudited consolidated financial statements include all normal
adjustments considered necessary to present fairly the financial positions as of
June 30, 1999, and the results of operations for the three months and six months
ended June 30, 1999 and 1998, and cash flows for the six months ended June 30,
1999 and 1998. Interim results are not necessarily indicative of results for a
full year.
The consolidated financial statements and notes are presented as permitted by
Form 10-Q, and do not contain certain information included in the Company's
audited consolidated financial statements and notes for the fiscal year ended
December 31, 1998.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Oil Scavenger Absorbent, Inc. (a
California corporation), 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 three months or less to be cash equivalents. As of June 30, 1999,
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.
9
<PAGE> 27
QUADRATECH, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
ACCOUNTS RECEIVABLE
The Company has not established an allowance for doubtful accounts and does not
use reserve method for recognizing bad debts. Bad debts are treated as direct
write-offs in the period management determines that collection is not probable.
There were no bad debt expense neither for six months ended June 30, 1999 nor
1998.
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 $12,126 and $14,187 for 1999 and 1998, respectively.
INTANGIBLE ASSETS
Patents, marks and copyrights are capitalized and amortized over five years
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.
10
<PAGE> 28
QUADRATECH, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - NOTES PAYABLE
<TABLE>
<CAPTION>
June 30, Dec. 31,
1999 1998
-------- --------
<S> <C> <C>
a.) Note to Annette Kroes,
interest at 10% per annum
due monthly; principal
payment of $10,000 commencing
1/15/2000 until paid $ 43,500 $ 50,500
b.) Note to Frances Rigney, due on
demand; will be re-negotiated in
October 1999 144,500 316,500
-------- --------
Total 188,000 367,000
Less current maturities 144,500 316,500
-------- --------
Long-term debt, net $ 43,500 $ 50,500
======== ========
</TABLE>
Maturities on notes payable are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------
<S> <C>
1999 $ 144,500
2000 43,500
----------
$ 188,000
==========
</TABLE>
NOTE 3 - COMMON STOCK TRANSACTIONS
In March 1999, the Company convert $192,000 note payable into 1,200,000 shares
of common stock.
The Company also grant 100,000 shares of stock to a new board of director and
500,000 shares to the Company's president.
In addition, the Company issued 202,073 shares of stock to the former president
in lieu of salary shortfalls of $26,000 for 1996 and $42,440 for 1997.
NOTE 4 - STOCK OPTIONS
In November 1998, the Company granted 1,600,000 stock options at various
exercise prices and expiration dates. As of June 30, 1999, 900,000 shares of
stock options had been exercised and 300,000 shares were expired. The remaining
balance of 400,000 shares are exercisable as follows:
11
<PAGE> 29
QUADRATECH, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - STOCK OPTIONS (Continued)
<TABLE>
<CAPTION>
Expiration
Exercise Date
Price August 31,
- --------- ----------
<S> <C>
$.10 1999
$.25 2000
$.50 2001
</TABLE>
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 six
months ended June 30, 1999 and 1998 consist of $800 minimum state income taxes
in each year.
As of December 31, 1998, the Company has approximately federal net operating
loss carryforwards of $2,938,581, and California NOL of $3,014,868 to reduce
future taxable income. To the extent not utilized, both carryforwards will begin
to expire beginning 2000 and 1998 respectively.
NOTE 6 - EARNINGS (LOSS) PER SHARE
Earnings per share is based on the weighted average number of shares of common
stock and common stock outstanding during the period. Earnings per share is
computed using the treasury stock method. Had the Stock Options (See Note 4)
been issued as of June 30, 1999, the Company's loss per share would have been
$0.0016 and $.0091 for three and six months ended June 30, 1999, respectively.
NOTE 7 - ACQUISITION OF BUSINESS
The Company is going to acquire 83.33% of the issued and outstanding stock of
Accu Chem Conversions, Inc. (a California corporation) in exchange for
15,000,000 shares of the Company's common stock. This transaction will be
accounted for as a purchase, with the assets and liabilities assumed recorded at
book values.
12
<PAGE> 30
QUADRATECH, INC. & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - LEASE COMMITMENTS
The Company leases its office facilities for $728 per month on a month-to-month
basis. Rent expense totaled $2,912 and $4,984 for 1999 and 1998, respectively.
In addition, the Company is responsible for its pro rata share of property
taxes.
NOTE 9 - 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 net losses of $187,875
for six months ended June 30, 1999, and as of that date, the Company had
accumulated deficit of $3,356,119, a working capital deficiency of $116,391 and
a deficit in net worth of $95,361.
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 consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
13
<PAGE> 31
To the Board of Directors and Shareholders
Quadratech, Inc. and Subsidiaries
City of Industry, California
I have prepared the pro forma condensed consolidated balance sheet of
Quadratech, Inc. (a Nevada corporation) dba Oil Scavenger Absorbent, Inc. (a
California corporation, wholly-owned) and its subsidiary, Accu Chem Conversion,
Inc., as of June 30, 1999, and the related condensed statement of pro forma
income for the six months then ended.
A compilation is limited to presenting in the form of pro forma financial
statements information that is the representation of management and does not
include evaluation of the support for the assumptions underlying the pro forma
transactions. I have not examined the accompanying pro forma financial
statements and, accordingly, do not express an opinion or any other form of
assurance on them.
The pro forma condensed consolidated financial statements may not be indicative
of the actual results of the acquisitions. The accompanying condensed
consolidated pro forma financial statements should be read in connection with
the historical financial statements of the Company and its subsidiaries.
Pasadena, California
September 3, 1999
<PAGE> 32
QUADRATECH, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, 1999
<TABLE>
<CAPTION>
ASSETS
- ------
"QUAD" "ACC" ADJUSTMENTS PRO FORMA
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Cash $ 15,314 $ 3,494 $ 18,808
Accounts Receivable 11,788 378,921 390,709
Inventory 3,838 132,619 136,457
Prepaid & Others 0 167,987 167,987
--------- ---------- ----------
Total Current Assets 30,940 683,021 713,961
Property & Equipment, net 45,013 657,640 702,653
Other 19,517 25,582 45,099
--------- ---------- ----------
Total $ 95,470 $1,366,243 $1,461,713
========= ========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
- --------------------
Accounts Payable &
Accrued Expenses $ 2,831 $ 485,413 $ 488,244
Income Tax Payable 0 37,403 37,403
Deferred Income Taxes 0 23,082 23,082
Notes Payable, current 144,500 193,374 337,874
--------- ---------- ----------
Total Current Liabilities 147,331 739,272 886,603
Long-Term Liabilities 43,500 445,542 489,042
--------- ---------- ----------
Total Liabilities 190,831 1,184,814 1,375,645
Stockholders' Equity
(Deficit) (95,361) 181,429 (30,238)(1) 55,830
Minority Interest 0 0 30,238 (1) 30,238
--------- ---------- ----------
TOTAL $ 95,470 $1,366,243 $1,461,713
========= ========== ==========
</TABLE>
<PAGE> 33
QUADRATECH, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Six Months Ended June 30, 1999
<TABLE>
<CAPTION>
"QUAD" "ACC" ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Sales $ 35,953 $1,422,585 $1,458,538
Cost of Sales 30,395 252,434 282,829
----------- ----------- ----------
Gross Profit 5,558 1,170,151 1,175,709
Operating Expenses 103,854 952,339 1,056,193
----------- ----------- ----------
Income (Loss) from
Operations (98,296) 217,812 119,516
Other Income (Expenses) (88,779) (109,035) (197,814)
----------- ----------- ----------
Income (Loss) Before Taxes (187,075) 108,777 (78,298)
Provision for Income Taxes 800 39,907 (39,907) (2) 800
Minority Interest in
Accu Chem Conversions 0 0 18,128 (3) 18,128
----------- ----------- ----------
Net Income (Loss) $(187,875) $ 68,870 $ (59,370)
=========== =========== ==========
Earnings (Loss) per share $ (0.0093) $ (0.0017)
=========== ==========
Weighted Average Shares
of Outstanding 20,269,555 35,269,555
========== ==========
</TABLE>
<PAGE> 34
QUADRATECH, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (Unaudited)
NOTE 1 - ACQUISITION OF BUSINESS
In September 1999, Quadratech, Inc. ("the Company" or "QUAD") acquired 5,000
shares or 83.33% of the issued and outstanding shares of capital stock of Accu
Chem Conversion, Inc. ("ACC"), in exchange for 15,000,000 shares of the
Company's common stock, which will be issued before year end of 1999. The
acquisition will be accounted for as a purchase, with the assets acquired and
liabilities assumed recorded at book values, and the results of ACC's operations
included in the Company's consolidated financial statements from the date of
acquisition.
The accompanying condensed consolidated financial statements illustrate the
effect of the acquisition ("Pro Forma") on the Company's financial position and
results of operations. The condensed consolidated balance sheet as of June 30,
1999 is based on the historical balance sheets of the Company and "ACC" as of
that date and assumes the acquisitions took place on that date. The condensed
consolidated statements of income for the six months ended June 30, 1999 are
based on the historical statements of income of the Company and "ACC" for that
period. The pro forma condensed consolidated statements of income assume the
acquisitions took place on January 1, 1999.
NOTE 2 - The pro forma adjustments to the condensed consolidated balance sheet
are as follows:
(1) To reflect the acquisition of Accu Chem Conversion, Inc. ("ACC") on the
basis of the book value of the assets acquired and liabilities assumed:
<TABLE>
<S> <C>
Issuance 15,000,000 shares of QUAD's stock $ 151,191
Eliminate ACC stockholders' equity (181,429)
Reflect minority interest of ACC 30,238
---------
Cost in excess of net assets acquired $ 0
=========
</TABLE>
NOTE 3 - The pro forma adjustments to the condensed consolidated statements of
income are as follows:
(2) To adjust tax expense to reflect the income tax effect at the Company's
effective tax rate of the pro forma adjustments to income before income
taxes.
(3) To reflect minority interest of Accu Chem Conversion, Inc. as of
June 30, 1999:
Net Income $108,777 * 16.67% minority interest = $18,128
=======
<PAGE> 1
PLAN AND AGREEMENT OF REORGANIZATION
THIS PLAN AND AGREEMENT OF REORGANIZATION (hereinafter referred to as
the "Agreement") is entered into as of this 1st day of April, 1999, by and
between ACCU CHEM CONVERSION, INC. (hereinafter referred to as "Accu Chem") and
the shareholders of Accu Chem (hereinafter referred to individually and
collectively as "Shareholder"), and QUADRATECH, INC. (hereinafter referred to as
"QUDT") .
WITNESSETH
WHEREAS, Accu Chem is a California corporation with authorized capital
stock of 1,000,000 shares, of which 6,000 shares were issued and outstanding
as of February 28, 1999 (hereinafter "Accu Chem Shares");
WHEREAS, QUDT is a Nevada corporation with authorized capital stock of
50,000,000 shares of common stock ($.001 par value), of which 21,513,301 shares
were issued and outstanding as of March 31, 1999.
WHEREAS, QUDT desires to purchase from Shareholder not less than eighty
(80%) percent of the issued and outstanding shares of Accu Chem owned by
Shareholder in exchange solely for QUDT shares of common stock stock ("Stock");
and
WHEREAS, it is the intention of Shareholder to exchange the Accu Chem
Shares held by it for Stock of QUDT, on the basis of 3,000 QUDT Stock for each
1 Accu Chem Share, on the terms and conditions set forth herein; and
WHEREAS, it is the intention of QUDT, Accu Chem and Shareholder that the
transactions contemplated hereby constitute a taxfree "reorganization" as
defined in the Internal Revenue Code of 1986, as amended and that all the terms
and provisions of this Agreement be interpreted, construed and enforced to
effectuate this intent.
NOW THEREFORE in consideration of the foregoing and the mutual
covenants, promises, representations and warranties contained herein, the
parties hereto agree as follows:
-1-
<PAGE> 2
Article I
EXCHANGE
1.1 Exchange of Stock of Accu Chem. At the Closing Date (as defined in
Article VII hereof), in accordance with the provisions of this Agreement and
applicable law, Shareholder shall transfer and QUDT shall acquire all of the
Accu Chem Shares owned by Shareholder, on the basis of 3,000 QUDT Stock for each
1 Accu Chem Share.
Article II
CONSIDERATION
2.1 Exchange. Shareholder and QUDT agree that all of the Accu. Chem
Shares owned by Shareholder shall be exchanged with QUDT for not to exceed
18,000,000 shares of common stock. All such Stock shall be issued in
certificates of such denominations, amounts and names as may be requested by
Shareholder.
2.2 Investment Intent. Shareholder represents and warrants that it is
acquiring said shares for investment purposes only and not with a view towards
resale or redistribution in violation of state and federal securities laws.
Shareholder agrees to deliver to QUDT at the closing, a letter setting forth an
agreement that said shares are being acquired for investment purposes only and
will not be sold except in compliance with the Securities Act of 1933, as
amended, and the Rules and Regulations promulgated thereunder. Said letter
agreement will provide, in part, that the Shareholder will agree not to sell
said shares for a period of three (3) years from the date of issue; provided,
however, that in the event QUDT has a public offering and the underwriter
thereof consents, the Shareholder shall have the right to sell such shares as
part of said offering, in the sole discretion of the underwriter.
2.3 Delivery. At said closing, Shareholder shall deliver certificates
for the shares of Accu Chem, duly endorsed in negotiable form, with signatures
guaranteed, free and clear from all claims and encumbrances.
Article III
REPRESENTATIONS AND WARRANTIES OF QUDT
QUDT represents the warrants to Shareholder as follows:
3.1 Organization. QUDT is a corporation duly incorporated, validly
existing and, at the closing, in good standing under the laws of the State of
Nevada and has the corporate power and authority to own or lease its properties
and to carry on business as now being conducted.
-2-
<PAGE> 3
3.2 Capitalization. Prior to the closing date, the authorized capital
stock of QUDT shall consist of 50,000,000 shares of common stock, of which
21,513,301 are issued and outstanding.
3.3 Financial Statements. QUDT has furnished to Shareholder financial
statements as disclosed to the Securities and Exchange Commission. All of said
financial statements, (i) are in accordance with QUDT's books and records, (ii)
present fairly and financial position of QUDT as of such dates, and its results
of operations and changes in financial position for the respective periods
indicated, (iii) have been prepared in conformity with generally accepted
accounting principles applied d on a consistent basis, and (iv) consistent with
prior business practice, contain adequate reserves for all known or contingent
liabilities, losses and refunds with respect to services or products already
rendered or sold.
3.4 Authorization. QUDT has the power to enter into this Agreement, and
this Agreement, when duly executed and delivered, will constitute the valid and
binding obligation of QUDT.
3.5 Effect of Agreement. The execution and delivery by QUDT of this
Agreement and the consummation of the transactions herein contemplated, (i) will
not conflict with, or result in a breach of the terms of, or constitute any
default under or violation of, any law or regulation of any governmental
authority, or the Articles of Incorporation or By-Laws of QUDT, or any material
agreement or instrument to which QUDT is a party or by which it is bound or is
subject; (ii) nor will it give to others any interest or rights, including
rights of termination, acceleration or cancellation, in or with respect to any
of the properties, assets, agreements, leases, or business of QUDT.
3.6 Nature of Representations. No representation, warranty or agreement
made by QUDT in this Agreement or any of the Schedules or any other Exhibits
hereto and no statement made in the Schedules or any such Exhibit, list,
certificate or schedule or other instrument or disclosure furnished by them in
connection with the transactions herein contemplated contains, or will contain,
any untrue statement of a material fact necessary to make any statement,
representation, warranty or agreement not misleading.
Article IV
REPRESENTATIONS AND WARRANTIES OF ACCU CHEM AND SHAREHOLDER
Accu Chem and Shareholder, and each of them, represent and warrant to
QUDT as follows:
4.1 Organization. Accu Chem is a corporation duly incorporated, validly
existing and, at the closing, in good standing under the laws of the State of
California and has the corporate power and authority to own or lease its
properties and to
-3-
<PAGE> 4
carry on business as now being conducted.
4.2 Capitalization. The authorized capital stock of Accu Chem consists
of one class of shares of stock, the total number of shares which Accu Chem is
authorized to issue is 1,000,000 shares, of which 6,000 shares are presently
issued and outstanding and held by four (4) individuals. There are no
outstanding options or warrants to acquire additional shares.
4.3 Authority. Accu Chem and Shareholder have the full power and
authority to enter into this Agreement and to carry out its obligations
hereunder. Other than approval by the Board of Directors and/or Shareholder, no
proceedings on the part of Shareholder is necessary to authorize this Agreement
or the transactions completed hereby. This Agreement constitutes the legal,
valid and binding obligation of Accu Chem and Shareholder enforceable in
accordance with its terms.
4.4 Financial Statements. Accu Chem has furnished to QUDT audited
financial statements as of the close of its last fiscal year and unaudited
financial statements as of March 31, 1999. All of said financial statements, (i)
are in accordance with Accu Chem's books and records, (ii) present fairly and
financial position of Accu Chem as of such dates, and its results of operations
and changes in financial position for the respective periods indicated, (iii)
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis, and (iv) consistent with prior business practice,
contain adequate reserves for all known or contingent liabilities, losses and
refunds with respect to services or products already rendered or sold.
4.5 All Patent/License Rights. To the best of its knowledge, Accu Chem
owns or possesses the requisite licenses or other rights to use all licenses,
patents, trademarks, service marks, service names and trade names presently
used. There is no claim or action by any person, or proceeding pending, or
threatened which challenges the exclusive rights of Accu Chem with respect to
said right's used, or contemplated to be used, in Accu Chem's business. Nothing
herein contained have or shall be deemed to constitute a representation or
warranty that such licenses, patents, trademarks, or trade names may not be
utilized or challenged in the future, and that they will be upheld if
challenged.
4.6 Contracts/Other Rights. Prior to the closing, Accu Chem will furnish
QUDT with a true and complete list and description of all material contracts and
licenses by and between Accu Chem and Shareholder, between them and with others.
Each of the agreements, contract, commitments, leases, plans and other
instruments, documents and undertakings to be supplied is valid and enforceable
in accordance with its terms. Accu Chem is not in default of the performance,
observance or fulfillment of any material obligations, covenant or condition
contained therein; and no event has occurred which with or without the giving of
notice or lapse of time, or both, would constitute a default thereunder;
-4-
<PAGE> 5
furthermore, except as may be disclosed in writing at the time of delivery, no
such agreement, contract, commitment, lease, plan or other instrument, document
or undertaking, in the reasonable opinion of Accu Chem, contains any contractual
requirement with which there is a likelihood Accu Chem will be unable to comply.
4.7 Competition. Except as set forth in the contracts described in 4.6
above or in 4.10 below, neither Accu Chem, nor any officer or director or
Shareholder of Accu Chem has any material direct or indirect financial or
economic interest in any related industry entity or in any competition or
customer of Accu Chem.
4.8 Effect of Agreement. The execution and delivery by Accu Chem and
Shareholder of this Agreement and the consummation of the transactions herein
contemplated, (i) will not conflict with, or result in a breach of the terms of,
or constitute a default under or violation of, any law or regulation of any
governmental authority, or the Articles of Incorporation or By-Laws of Accu
Chem, or any material agreement or instrument to which Accu Chem or Shareholder
is a party or by which it is bound or is subject; (ii) nor will it give to rise
to any interests or rights, including rights of termination, acceleration or
cancellation, in or with respect to any of the properties, assets, agreements,
leases, or business of Accu Chem.
4.9 Personal Property. All of the property, assets and equipment owned
by or used by Accu Chem is in good repair, well maintained, and in good and
satisfactory operating condition consistent with their age, free from any known
defects, except such minor defects as do not substantially interfere with the
continued use thereof in the conduct of normal operations and such property,
assets, and equipment which is owned by Accu Chem is valued on the Balance Sheet
at original purchase price less reasonable depreciation consistently applied in
accordance with generally accepted accounting principles.
4.10 Leases. Prior to the closing, Accu Chem will furnish QUDT with true
and complete list and description of all leases of real property and equipment
by and between Accu Chem and the lessees. Accu Chem and Admiral Transportation
(a California corporation), owned and controlled by Carl E. Erb, have an oral
agreement for the possession of certain real property presently utilized by Accu
Chem. Said agreement may be terminated by Accu Chem upon thirty (30) days'
written notice, in accordance with California law. Accu Chem will not enter into
any further agreements with Admiral Transportation (a California corporation)
without the prior written consent of QUDT. Each of said leases are valid and
enforceable in accordance with its terms.
4.11 Minutes Book. The records of meetings and other corporate actions
of the Board of Directors (including any committees of the Board) of Accu Chem
which are contained in the Minute Books of Accu Chem contain complete and
accurate records of the matters reflected in such minutes.
-5-
<PAGE> 6
4.12 Litigation; Claims. Neither Shareholder nor Accu Chem is a party
to, and there are not any claims, actions, suits, investigations or proceedings
pending or threatened against Accu Chem or its business, at law or in equity, or
before or by any governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, which if determined adversely would have a
material effect on the business or financial condition of Accu Chem or the
ability of Accu Chem to carry on its business. The consummation of the
transactions herein contemplated will not conflict with or result in the breach
or violation of any judgment, order, writ, injunction or decree of any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
4.13 Taxes and Reports. At the Closing Date, Accu Chem and Shareholder
(i) will have filed all tax returns required to be filed by any jurisdiction,
domestic or foreign, to which it is or has been subject, (ii) has either paid in
full all taxes due and taxes claimed to be due by each jurisdiction, and any
interest and penalties with respect thereto, and (iii) has adequately reflected
as liabilities on its books, all taxes that have accrued for any period to and
including the Closing Date.
4.14 Compliance with Laws and Regulations. To the best of their
knowledge, Accu Chem and Shareholder have complied with, and are not in
violation of any federal, state, local or foreign statute, law, rule or
regulation with respect to the conduct of Accu Chem's businesses, which
violation might have a material adverse effect on the business, financial
condition or earnings of Accu Chem.
4.15 Finders. Accu Chem and Shareholder, and each of them, is not
obligated, absolutely or contingently, to any person for financial advice, a
finder's fee, brokerage commission, or other similar payment in connection with
the transactions contemplated by this Agreement.
4.16 Nature of Representations. Accu Chem and Shareholder have taken
reasonable care to ensure that all disclosures and facts are true and accurate
and that there are no other material facts, the omission of which would make
misleading any statement herein. Further, no representation, warranty or
agreement made by Accu Chem and Shareholder in this Agreement or any of the
Schedules or any other Exhibits hereto and no statement made in the Schedules or
any such Exhibit, list, certificate or schedule or other instrument or
disclosure furnished by them in connection with the transactions herein
contemplated contains, or will contain, any untrue statement of a material fact
necessary to make any statement, representation, warranty or agreement not
misleading.
-6-
<PAGE> 7
Article V
ACCESS TO INFORMATION
5.1 Access to Information. Accu Chem and Shareholder shall afford
representatives of QUDT reasonable access to officers, personnel, and
professional representatives of Accu Chem and such of the financial, contractual
and corporate records of Accu Chem as shall be reasonably necessary for QUDT's
investigations and appraisal of Accu Chem.
5.2 Effect of Investigations. Any such investigation by QUDT of Accu
Chem shall not affect any of the representations and warranties hereunder and
shall not be conducted in such manner as to interfere unreasonably with the
operation of the business of Accu Chem.
Article VI
CONDITIONS TO OBLIGATIONS OF QUDT
The obligations of QUDT under this Agreement are, at the option of QUDT,
subject to the satisfaction, at and prior to the Closing Date, of the following
conditions:
6.1 Shareholder Acceptance. Between the date hereof and April 20, 1999,
not less than 80% of the issued and outstanding shares of Accu Chem owned by
Shareholder shall enter into this Agreement.
6.2 Lease. Between the date hereof and the Closing Data, there shall be
no written lease entered into by and between Accu Chem and Admiral
Transportation (a California corporation) and Carl E. Erb, or either, or with
any other shareholder of Accu Chem, without the prior written consent of QUDT.
Notwithstanding the foregoing, in the event that Carl E. Erb is an exchanging
shareholder under this Agreement, a written lease of the real property presently
utilized by Accu Chem and orally leased from Admiral Transportation (a
California corporation) as is referred to in 4.10 above, on terms substantially
consistant with the present oral terms heretofore disclosed to QUDT, may be
negotiated and the execution thereof will not be unreasonably withheld;
provided, however, that said written lease is negotiated and approved by QUDT
prior to April 29, 1999.
6.3 Fulfillment of Covenants. All the terms, covenants and conditions
of this Agreement to be complied with and performed by Accu Chem at or before
the Closing Date shall have been duly complied with and performed.
6.4 Accuracy of Representations and Warranties: Other Documents. All of
the representations and warranties made by all parties to this Agreement shall
be true as of the Closing Date.
-7-
<PAGE> 8
6.5 No Litigation. There shall be no action, proceeding, investigation
or pending or actual litigation the purpose of which is to enjoin or may be to
enjoin the transactions contemplated by this Agreement or which would have the
effect, if successful, of imposing a material liability upon Accu Chem, or any
of the officers or directors thereof, because of this consummation of the
transactions contemplated by this Agreement.
Article VII
CONDITIONS TO OBLIGATIONS OF SHAREHOLDER
The obligations of Shareholder under this Agreement are, at the option
of Shareholder, subject to the satisfaction, at and prior to the Closing Date,
of the following conditions:
7.1 Fulfillment of Covenants. All the terms, covenants and conditions of
this Agreement to be complied with and performed by Accu Chem at or before the
Closing Date shall have been duly complied with and performed.
7.2 Accuracy of Representations and Warranties; Other Documents. All of
the representations and warranties made by all parties to this Agreement shall
be true as of the Closing Date.
7.3 No Litigation. There shall be no action, proceeding, investigation
or pending or actual litigation the purpose of which is to enjoin or may be to
enjoin the transactions contemplated by this Agreement or which would have the
effect, if successful, of imposing a material liability upon Accu Chem, or any
of the officers or directors thereof, because of the consummation of the
transactions contemplated by this Agreement.
Article VIII
CLOSING
8.1 Closing Date. The consummation of the exchange on May 15, 1999 or
sooner shall take place, at the offices of Ronald J. Stauber, 1880 Century Park
East, Suite 300, Los Angeles, California 90067, or such other time or place as
shall be mutually agreed upon by the parties to this Agreement.
8.2 Actions to be Taken by Parties on the Closing Date. On the Closing
Date, each party shall deliver to the other all documents or agreements provided
or herein to be delivered on the Closing Date.
8.3 other. Between the date hereof and the Closing Date, Accu Chem will
take no actions, other than those reasonably required to consummate a closing,
without the prior written consent of QUDT.
-8-
<PAGE> 9
Article IX
INDEMNIFICATION AND ARBITRATION
9.1 Indemnification. Each of the parties agree to indemnify and hold
harmless the other against any and all damages, claims, losses, expenses,
obligations and liabilities (including reasonable attorney's fees) resulting
from or related to any breach of, or failure by each of the parties to perform
any of their representations, warranties, covenants, conditions or agreements in
this Agreement or in any schedule, certificate, exhibit or other document
furnished, or to be furnished under this Agreement.
9.2 Claims of Indemnification. Any claim for indemnification pursuant to
this Agreement, unless otherwise received by means of direct negotiation among
the parties upon reasonable oral notification by the party seeking
indemnification to all other parties, shall be made by writing of the nature and
amount of the claim to the other.
Article X
PAYMENT OF EXPENSES
10.1 Expenses. All costs and expenses of the transaction contemplated
herein shall be borne by the respective parties hereto.
Article XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
11.1 Survival. All statements contained in the Schedules, any Exhibit or
other instrument delivered by or on behalf of the shareholders or in connection
with the transactions contemplated by this Agreement, shall be deemed to be
representations made by or on behalf of the parties to this Agreement, all
representations, warranties and agreements made by the parties to this Agreement
or pursuant hereto shall survive.
Article XII
GENERAL
12.1 Partial Invalidity. If any term or provision of this Agreement or
the application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement or the application of
such term or provision to persons or circumstances other than those to which it
is held invalid or unenforceable, shall not be affected thereby, and each such
term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
-9-
<PAGE> 10
12.2 Waiver. No Waiver of any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed and extension of
the time for performance of any other obligation or act.
12.3. Notices. All notices or other communications required or permitted
hereunder shall be in writing, and shall be sent by registered or certified
mail, postage prepaid, return receipt requested, and shall be deemed received
upon mailing thereof.
To: Quadratech, Inc.
126 West Maple Avenue
Monrovia, California 91016
cc: Ronald J. Stauber, Esq.
1880 Century Park East Suite 300
Los Angeles, California 90067
To: Shareholder
[To the address set forth on
the signature line]
To: Accu Chem Conversion, Inc.
300 N. Baldwin Park
City of Industry, CA 91746
Notice of change of address shall be given by written notice in the
manner detailed in this subparagraph 12.3.
12.4 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the permitted successors and assigns of the
parties hereto.
12.5 Professional Fees. In the event of the bringing of any action or
suit by a party hereto against another party hereunder by reason of any breach
of any of the covenants, agreements or provisions on the part of the other party
arising out of this Agreement, then in that event the prevailing party shall be
entitled to have and recover of and from the other party all costs and expenses
of the action or suit, including actual attorney's fees, accounting fees, and
other professional fees resulting therefrom.
12.6 Entire Agreement. This Agreement is the final expression of, and
contains the entire agreement between, the parties with respect to the subject
matter hereof and supersedes all prior understandings with respect thereto. This
Agreement may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
party to be charged or by his agent duly authorized in writing or as otherwise
expressly permitted herein. The parties
-10-
<PAGE> 11
do not intend to confer any benefit hereunder on any person, firm or corporation
other than the parties hereto.
12.7 Time of Essence. The parties hereby acknowledge and agree that time
is strictly of the essence with respect to each and every term, condition,
obligation and provision hereof and that failure to timely perform any of the
terms, conditions, obligations or provisions hereof by either party shall
constitute a material breach of and non-curable (but waivable) default under
this Agreement by the party so failing to perform.
12.8 Construction. Headings at the beginning of each paragraph and
subparagraph are solely for the convenience of the parties and are not a part of
the Agreement. Whenever required by the context of this Agreement, the singular
shall include the plural and the masculine shall include the feminine. This
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to paragraphs and subparagraphs are to this Agreement.
In the event the date on which any party is required to take any action under
the terms of this Agreement is not a business day, the action shall be taken on
the next succeeding day.
12.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which taken together
shall constitute one instrument.
12.10 Governing Law. The parties hereto expressly agree that this
Agreement shall be governed by, interpreted under, and construed and enforced in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
Los Angeles, California.
DATED: April 12, 1999 QUADRATECH, INC.
By: /s/ PERRY COPE
---------------------------------
Perry Cope, President
DATED: April 12, 1999 ACCU CHEM CONVERSION, INC.
By: /s/ CRAIG G. ROBITAILLE
---------------------------------
Craig Robitaille,
President
-11-
<PAGE> 12
SHAREHOLDER
/s/ CRAIG G. ROBITAILLE
-----------------------------------------
CRAIG G. ROBITAILLE
21391 Dockside Circle
Huntington Beach, CA 92646
/s/ LLOYD D. SMITHSON
-----------------------------------------
LLOYD D. SMITHSON
1170 Oakenbate Road
San Dimas, CA 91773
-----------------------------------------
CARL E. ERB
13875 E. Philadelphia
Whittier, CA 90601
/s/ MICHAEL J. OLIVA
-----------------------------------------
MICHAEL J. OLIVA
10552 Beardsley Circle
Villa Park, CA
-12-
