<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 1999
OR
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION FROM _______ TO ________.
COMMISSION FILE NUMBER 0-26856
---------
QUADRATECH, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 95-4396848
-------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 North Baldwin Park Boulevard
City of Industry, California 91746
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
----------------------------------------------
(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 /X/ No / /
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: At September 30, 1999, there were
outstanding 36,513,301 shares of the Registrant's Common Stock, $.001 par value.
Transitional Small Business Disclosure Format: Yes / / No /X/
<PAGE> 2
PART I
FINANCIAL INFORMATION
Item I. Financial Statements
See Financial Statements presented below.
Item II. Management's Discussion and Analysis or Plan of Operation
Results of Operation.
For the quarter ended September 30, 1999, the Company had continued to
focus on marketing its oil absorbent products.
The Company has continued to maintain its reduced 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. The Company, in the fourth quarter, will relocate the office and
warehouse facilities for additional savings.
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 indebted may provide minimum
capital resources to finance operations and fund capital expenditures. 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 and research activities.
PART II
OTHER INFORMATION
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 - Submission of Matter to Vote of Security
Holders ...........................................................None
<PAGE>
Item 5 - Other Information.
(a) As of April 1, 1999, the Company entered into a Plan and Agreement
of Reorganization with Accu Chem Conversion, Inc., a California
corporation and its shareholders. See Item 6 below. This was
completed as of October 1, 1999.
Item 6 - Exhibits and Reports on Form 8-K.
(a) On October 22, 1999, the Company filed a Form 8-K with the
Securities and Exchange Commission which contains a description of
the transaction by and between the Company, Accu Chem Conversion,
Inc. and its shareholders and contains financial information of
the Company and Accu Chem Conversion, Inc. and a proforma
financial statement reflecting the business combination.
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.
Dated: October 26, 1999 QUADRATECH, INC.
(Company)
By: /s/ Craig G. Robitaille
--------------------------
Craig G. Robitaille,
President
<PAGE>
QUADRATECH, INC. and PROPOSED
SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
QUDT ACCUCHEM CONSOLIDATED
ASSETS SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1999 1999
<S> <C> <C> <C>
Current Assets
Cash $ 1,738 $ 56,281 $ 58,019
Accounts Receivable $ 4,418 $ 424,092 $ 428,510
Employee Advances $ - $ 7,060 $ 7,060
Inventories $ 3,838 $ 137,752 $ 141,590
Prepayments $ - $ 118,095 $ 118,095
------------- ------------- -------------
Total Current Assets $ 9,994 $ 743,280 $ 753,274
------------- ------------- -------------
Property & Equipment
Furniture & Equipment $ 86,871 $ 12,732 $ 99,603
Terminal Equipment & Plant Machinery $ 66,900 $ 223,223 $ 290,123
Automotive Equipment $ 8,818 $ 530,295 $ 539,113
Leasehold Improvements $ - $ 282,383 $ 282,383
------------- ------------- -------------
$ 162,589 $ 1,048,633 $ 1,211,222
Less: Accumulated Depreciation $ (123,666) $ (373,246) $ (496,912)
------------- ------------- -------------
Total Property & Equipment $ 38,923 $ 675,387 $ 714,310
------------- ------------- -------------
Other Assets
Reimbursable Charges $ - $ 11,385 $ 11,385
Organizational Costs $ - $ 315 $ 315
Patents, Marks & Copyrights, net of
accumulated amortization of $3,545
and $2,878 respectively $ 12,470 $ 12,470
Deposits $ 6,825 $ 22,332 $ 29,157
------------- ------------- -------------
Total Other Assets $ 19,295 $ 34,032 $ 53,327
------------- ------------- -------------
TOTAL ASSETS $ 68,212 $ 1,452,699 $ 1,520,911
============= ============= =============
</TABLE>
See Accompanying Notes and Accountant's Report
<PAGE>
QUADRATECH, INC. and PROPOSED SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
CONSOLIDATED PRO FORMA
LIABILITIES and STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
QUDT ACCUCHEM CONSOLIDATED
ASSETS SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1999 1999
<S> <C> <C> <C>
Current Liabilities
Accounts Payable $ 1,350 $ 214,313 $ 215,663
Accrued Expenses $ 393 $ 237,217 $ 237,610
Notes Payable, Current Portion $ 158,500 $ 224,464 $ 382,964
Income Tax Payable $ - $ 83,269 $ 83,269
Deferred Income Tax Payable $ - $ 23,082 $ 23,082
------------- ------------- -------------
Total Current Liabilities $ 160,243 $ 782,345 $ 942,588
Long Term Liabilities
Long Term Debt $ 51,500 $ 412,642 $ 464,142
------------- ------------- -------------
Total Liabilities $ 211,743 $ 1,194,987 $ 1,406,730
------------- ------------- -------------
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 $ 18,000 $ 39,513
Paid in Capital $ 3,239,245 $ 16,000 $ 3,255,245
Accumulated (Deficit)/Retained Earnings $ (3,404,289) $ 223,712 $ (3,180,577)
------------- ------------- -------------
Total Stockholders' Equity (Deficit) $ (143,531) $ 257,712 $ 114,181
------------- ------------- -------------
TOTAL LIAB. AND STOCKHOLDERS EQUITY $ 68,212 $ 1,452,699 $ 1,520,911
============= ============= ==============
</TABLE>
See Accompanying Notes and Accountants Report
<PAGE>
QUADRATECH, INC. and PROPOSED SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS and ACCUMULATED DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
QUADRATECH ACCU CHEM CONSOLIDATED AT
Nine Months ending Sept. 30, 1999 9/30/1999
---------------------------------- -------------
<S> <C> <C> <C>
SALES $ 41,932 $ 2,327,387 $ 2,369,319
Less Discounts Taken $ - $ (3,012) $ (3,012)
------------- ------------- -------------
NET SALES $ 41,932 $ 2,324,375 $ 2,366,307
COST OF SALES - Sch A $ 36,269 $ 329,949 $ 366,218
GROSS PROFIT $ 5,663 $ 1,994,426 $ 2,000,089
Operating Expenses - Sch B $ 143,098 $ 1,559,305 $ 1,702,403
Income (Loss) from Operations $ (137,435) $ 435,121 $ 297,686
Other Income (Expenses)
Interest Income $ - $ 92 $ 92
Rental Income $ - $ 50,800 $ 50,800
Other Income $ 10,273 $ - $ 10,273
Gain on disposal of Assets - $ -
Depreciation and Amortization $ (18,883) $ (78,055) $ (96,938)
Interest Expense $ (3,763) $ (41,079) $ (44,842)
Payroll Tax Prior Years $ - $ (30,155) $ (30,155)
Penalties & Late Charges $ (2,058) $ - $ (2,058)
Sales Tax - Prior Years $ (2,000) $ - $ (2,000)
Officers Life Insurance $ (2,939) $ - $ (2,939)
Officers Salaries $ (10,000) $ (105,798) $ (115,798)
Officers Salaries - Back Pay $ (68,440) $ - $ (68,440)
------------- ------------- -------------
Total Other Income (Expense) $ (97,810) $ (204,195) $ (302,005)
------------- ------------- -------------
PROFIT or (LOSS) BEFORE TAXES $ (235,245) $ 230,926 $ (4,319)
Provision for Income Taxes $ 800 $ (800) $ (1,600)
------------- ------------- -------------
Net Income (Loss) $ (236,045) $ 230,126 $ (5,919)
============= ============= =============
Retained Earnings or (Deficit)
Beginning Balance $ (3,168,244) $ 78,559 $ (3,089,685)
Prior Year Adjustment $ - $ - $ -
------------- ------------- -------------
Ending Balance $ (3,404,289) $ 223,712 $ (3,180,577)
============= ============= =============
Profit or (Loss) per share $ (0.0114) $ 24.192 DNA
Weighted Average Shares 20,642,679 6,000 DNA
Outstanding
</TABLE>
See Accompanying Notes and Accountant's Report
<PAGE>
QUADRATECH, INC. and PROPOSED SUBSIDIARY PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS and ACCUMULATED DEFICIT
(UNAUDITED)
NOTE: BELOW REFLECTED SCHEDULE REFLECTS BENEFICIAL INCOME TAX RESULTS
FROM ACQUISION POSITION AFTER NINE MONTHS OF OPERATIONS.
<TABLE>
<CAPTION>
QUADRATECH ACCU CHEM CONSOLIDATED AT
Nine Months ending Sept. 30, 1999 9/30/1999
------------------------------- -------------
<S> <C> <C> <C>
SALES $ 41,932 $ 2,327,387 $ 2,369,319
Less Discounts Taken $ - $ (3,012) $ (3,012)
------------- ------------- -------------
NET SALES $ 41,932 $ 2,324,375 $ 2,366,307
COST OF SALES - Sch A $ 36,269 $ 329,949 $ 366,218
------------- ------------- -------------
GROSS PROFIT $ 5,663 $ 1,994,426 $ 2,000,089
Operating Expenses - Sch B $ 143,098 $ 1,559,305 $ 1,702,403
------------- ------------- -------------
Income (Loss) from Operations $ (137,435) $ 435,121 $ 297,686
------------- ------------- -------------
Total Other Income (Expense) $ (97,810) $ (204,195) $ (302,005)
------------- ------------- -------------
PROFIT or (LOSS) BEFORE TAXES (235,245) $ 230,926 $ (4,319)
Provision for Income Taxes $ 800 $ 800 $ 1,600
------------- ------------- -------------
Net Income (Loss) $ (236,045) $ 231,726 $ (2,719)
============= ============= =============
Retained Earnings or (Deficit)
Beginning Balance $ (3,168,244) $ 78,559 $ (3,089,685)
Prior Year Adjustment $ - $ - $ -
------------- ------------- -------------
Ending Balance $ (3,404,289) $ 310,285 $ (3,094,004)
============= ============= =============
Profit or (Loss) per share $ (0.0114) $ 51.714 DNA
Weighted Average Shares 20,642,679 6,000 DNA
Outstanding
</TABLE>
See Accompanying Notes and Accountant's Report
<PAGE>
QUADRATECH, INC. and SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
SEPTEMBER 30, DECEMBER 31,
1999 1998
Current Assets
Cash 1,738 12,261
Accounts Receivable 4,418 36,528
Inventories 3,838 3,838
------------- -------------
Total Current Assets 9,994 52,627
------------- -------------
Property & Equipment
Furniture & Equipment 86,871 84,502
Plant & Machinery 66,900 66,900
Motor Vehicles 8,818 8,818
------------- -------------
162,589 160,220
Less: Accumulated Depreciation (123,666) (105,450)
------------- -------------
Total Property & Equipment 38,923 54,770
------------- -------------
Other Assets
Patents, Marks & Copyrights, net of
accumulated amortization of $3,545
and $2,878 respectively 12,470 12,667
Deposits 6,825 6,825
------------- -------------
Total Other Assets 19,295 19,492
------------- -------------
TOTAL ASSETS 68,212 126,889
============= =============
See Accompanying Notes and Accountant's Report
<PAGE>
QUADRATECH, INC. and SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES and STOCKHOLDERS' EQUITY (DEFICIT)
September 30, December 31,
1999 1998
Current Liabilities
Accounts Payable $ 1,350 $ 14,248
Accrued Expenses $ 393 $ 3,567
Notes Payable, Current Portion $ 158,500 $ 316,500
------------- -------------
Total Current Liabilities $ 160,243 $ 334,315
Long Term Liabilities
Long Term Debt $ 51,500 $ 50,500
------------- -------------
Total Liabilities $ 211,743 $ 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 $ (3,404,289) $ (3,168,244)
------------- -------------
Total Stockholders' Equity (Deficit) $ (143,531) $ (257,926)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 68,212 $ 126,889
============= =============
<PAGE>
QUADRATECH, INC and SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS and ACCUMULATED DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months ending Nine Months ending
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
SALES $ 5,979 $ 18,330 $ 41,932 $ 46,557
Less Discounts Taken $ - $ 777 $ - $ (130)
------------- ------------- ------------- -------------
NET SALES $ 5,979 $ 19,107 $ 41,932 $ 46,427
COST OF SALES - Sch A $ 5,874 $ 12,509 $ 36,269 $ 38,272
------------- ------------- ------------- -------------
GROSS PROFIT $ 105 $ 6,598 $ 5,663 $ 8,155
Operating Expenses - Sch B $ 39,244 $ 87,704 $ 143,098 $ 209,053
------------- ------------- ------------- -------------
Income (Loss) from Operations $ (39,139) $ (81,106) $ (137,435) $ (200,898)
Other Income (Expenses)
Interest Income $ - $ - $ - $ 32
Other Income $ - $ 242 $ 10,273 $ 289
Gain on disposal of Assets $ - $ 1,088 $ - $ 1,088
Depreciation and Amortization $ (6,312) $ (6,882) $ (18,883) $ (21,498)
Interest Expense $ (1,250) $ (2,941) $ (3,763) $ (14,856)
Penalties & Late Charges $ - $ (152) $ (2,058) $ (210)
Sales Tax - Prior Years $ - $ - $ (2,000) $ -
Officers Life Insurance $ (1,469) $ - $ (2,939) $ -
Officers Salaries $ - $ (5,500) $ (10,000) $ (21,750)
Officers Salaries - Back Pay $ - $ - $ (68,440) $ -
------------- ------------- ------------- -------------
Total Other Income (Expense) $ (9,031) $ (14,145) $ (97,810) $ (56,905)
------------- ------------- ------------- -------------
NET (LOSS) BEFORE TAXES $ (48,170) $ (95,251) $ (235,245) $ (257,803)
Provision for Income Taxes $ - $ - $ 800 $ 800
------------- ------------- ------------- -------------
Net Income (Loss) $ (48,170) $ (95,251) $ (236,045) $ (258,603)
============= ============= ============= =============
ACCUMULATED DEFICIT
Beginning Balance $ (3,356,119) $ (3,015,153) $ (3,168,244) $ (2,850,622)
Prior Year Adjustment $ - $ 6,937 $ - $ 5,758
------------- ------------- ------------- -------------
Ending Balance $ (3,404,289) $ (3,103,467) $ (3,404,289) $ (3,103,467)
------------- ------------- ------------- -------------
Loss per share - Primary $ (0.0022) $ (0.0051) $ (0.0114) $ (0.0156)
Weighted Average Shares 21,513,301 18,611,228 20,642,679 16,541,964
Outstanding
</TABLE>
See Accompanying Notes and Accountant's Report
<PAGE>
QUADRATECH, INC. and SUBSIDIARY
COST OF SALES
(UNAUDITED)
<TABLE>
<CAPTION>
Schedule A
Three Months Ending Nine Months Ending
September 30, September 30,
COST OF SALES 1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Beginning Inventory $ 3,838 $ 3,838 $ 3,838 $ 3,838
Purchases $ 779 $ 4,818 $ 9,948 $ 14,138
Production Labor $ 4,301 $ 7,548 $ 21,588 $ 23,070
Warehouse Supplies $ 794 $ 143 $ 4,733 $ 1,064
--------- --------- --------- ---------
Less Ending Inventory $ (3,838) $ (3,838) $ (3,838) $ (3,838)
--------- --------- --------- ---------
Total Cost of Sales $ 5,874 $ 12,509 $ 36,269 $ 38,272
========= ========= ========= =========
</TABLE>
See Accompanying Notes and Accountant's Report
<PAGE>
QUADRATECH, INC. and SUBSIDIARY
OPERATING EXPENSES
(UNAUDITED)
<TABLE>
<CAPTION>
Schedule B
Three Months Ending Nine Months Ending
September 30, September 30,
OPERATING EXPENSES 1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Accounting $ 900 $ 3,575 $ 11,150 $ 21,015
Advertising $ - $ 404 $ 480 $ 2,004
Bad Debts $ 159 $ - $ 159
Bank and Finance Charges $ 31 $ 438 $ 197 $ 1,413
Car Allowance and Expenses $ 1,649 $ 2,380 $ 6,079 $ 8,505
Commissions $ 3,900 $ 2,520 $ 6,400 $ 5,140
Consulting Fees $ 13,000 $ 44,668 $ 36,000 $ 67,618
Contributions $ 25 $ - $ 25 $ -
Customer and Public Relations $ - $ - $ - $ 11
Directors Meetings $ 159 $ 70 $ 214 $ 630
Dues and Subscriptions $ - $ - $ 100 $ 245
Entertainment $ 592 $ 466 $ 2,039 $ 1,576
Equipment Rental $ 77 $ 104 $ 154 $ 265
Freight and Postage $ 73 $ 187 $ 504 $ 321
Insurance $ 6,127 $ 7,314 $ 16,708 $ 16,416
Legal and Professional $ 2,114 $ 7,212 $ 6,417 $ 11,750
Legal Settlement $ - $ - $ 5,136 $ -
Licenses and Permits $ - $ 55 $ 95 $ 420
Maintenance $ 105 $ 880 $ 810 $ 3,246
Office Supplies $ 713 $ 311 $ 2,150 $ 2,417
Other Expenses $ - $ 98 $ 37 $ 584
Outside Services $ - $ (1,004) $ 320 $ 1,506
Parking $ 94 $ 22 $ 236 $ 22
Payroll Taxes $ 756 $ 1,553 $ 5,613 $ 6,654
Printing and Reproduction $ - $ 34 $ - $ 157
Rent $ - $ 2,184 $ 2,912 $ 7,168
Research and Development $ - $ - $ - $ 600
Salaries and Wages $ 4,320 $ 5,760 $ 18,820 $ 22,552
Selling Expenses $ - $ 353 $ - $ 443
Shipping $ 350 $ (283) $ 3,093 $ 2,048
Supplies $ - $ - $ 89 $ 97
Taxes - Property $ 1,010 $ 1,079 $ 2,488 $ 2,523
Telephone $ 1,547 $ 3,895 $ 7,363 $ 11,879
Trade Shows $ - $ 1,251 $ 57 $ 3,063
Travel $ 427 $ 1,110 $ 4,450 $ 3,415
Utilities $ 1,116 $ 1,068 $ 2,803 $ 3,350
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES $ 39,244 $ 87,704 $143,098 $209,053
========= ========= ========= =========
</TABLE>
See Accompanying Notes and Accountant's Report
<PAGE>
ACCU CHEM CONVERSION, INC.
BALANCE SHEET
September 30, 1999
(Unaudited)
ASSETS
Current Assets
Cash $ 56,281
Accounts Receivable 424,092
Employee Advances 7,060
Inventories 137,752
Prepayments 118,095
------------
Total Current Assets 743,280
------------
Property & Equipment
Furniture & Equipment 12,732
Terminal Equipment & Plant Machinery 223,223
Automotive Equipment 530,295
Leasehold Improvements 282,383
------------
1,048,633
Less: Accumulated Depreciation (373,246)
------------
Total Property & Equipment 675,387
------------
Other Assets
Reimbursable Charges 11,385
Organizational Costs 315
Patents, Marks & Copyrights, net of
accumulated amortization of $3,545
and $2,878 respectively
Deposits 22,332
------------
Total Other Assets 34,032
------------
TOTAL ASSETS $ 1,452,699
============
See Accompanying Notes and Accountant's Report
<PAGE>
ACCU CHEM CONVERSION, INC.
BALANCE SHEET
September 30, 1999
(Unaudited)
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts Payable $ 214,313
Accrued Expenses 237,217
Notes Payable, Current Portion 224,464
Income Tax Payable 83,269
Deferred Income Tax Payable 23,082
------------
Total Current Liabilities 782,345
Long Term Liabilities
Long Term Debt 412,642
------------
Total Liabilities 1,194,987
------------
Stockholders' Equity
Common Stock, $3 stated value, 1,000,000
shares authorized, 6,000 issued and outstanding 18,000
Paid in Capital 16,000
Accumulated (Deficit) / Retained Earnings 223,712
------------
Total Stockholders' Equity (Deficit) 257,712
------------
TOTAL LIAB. AND STOCKHOLDERS EQUITY $ 1,452,699
============
See Accompanying Notes and Accountant's Report
<PAGE>
ACCU CHEM CONVERSION, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
For Three and Nine Months Ending September 30, 1999
(UNAUDITED)
Three Months
ending Year To
Sept. 30, 1999 Date
-------------- --------------
SALES $ 902,300 $ 2,327,387
Less Discounts Taken (510) (3,012)
-------------- --------------
NET SALES 901,790 2,324,375
COST OF SALES - Sch A 77,515 329,949
-------------- --------------
GROSS PROFIT 824,275 1,994,426
Operating Expenses - Sch B 606,966 1,559,305
-------------- --------------
Income from Operations 217,309 435,121
-------------- --------------
Other Income (Expenses)
Interest Income 10 92
Rental Income 17,300 50,800
Depreciation and Amortization (27,020) (78,055)
Interest Expense (14,107) (41,079)
Payroll Tax Prior Years (30,155) (30,155)
Officers Salaries (41,188) (105,798)
-------------- --------------
Total Other Income (Expense) (95,160) (204,195)
-------------- --------------
PROFIT or (LOSS) BEFORE TAXES 122,149 230,926
Provision for Income Taxes 45,866 85,773
-------------- --------------
Net Income (Loss) 76,283 145,153
============== ==============
Retained Earnings
Beginning Balance 147,429 78,559
-------------- --------------
Ending Balance $ 223,712 $ 223,712
============== ==============
Profit or (Loss) per share $ 12.7133 $ 24.192
Total Shares Outstanding 6,000 6,000
See Accompanying Notes and Accountant's Report
<PAGE>
ACCU CHEM CONVERSION, INC.
OPERATING EXPENSES
For Three and Nine Months Ending September 30, 1999
(Unaudited)
SCHEDULE B
Three Months
ending Year To
Sept. 30, 1999 Date
-------------- --------------
OPERATING EXPENSES
Advertising $ - $ 400
Auto and Truck 67,880 138,568
Bad Debts - 250
Commissions - 6,173
DMV Fees 8,398 23,910
Freight 1,586 9,106
Fuel 29,892 65,375
Insurance 39,342 128,900
Legal and Professional 5,340 16,131
Licenses and Permits 889 2,162
Office Supplies 6,239 14,459
Owner Operators 129,857 252,056
Postage 271 392
Rent 50,287 137,922
Repair and Maintenance 3,350 38,909
Safety 150 2,893
Salaries and Wages 178,375 476,124
Sales Promotion 750 2,326
Supplies and Tools 2,206 3,464
Taxes - Payroll 17,373 52,176
Taxes - Property 454 907
Telephone 8,660 23,894
Terminal Operations 27,496 74,242
Tires Expense 12,350 35,830
Travel 3,392 7,743
Utilities 12,399 43,835
Weight Fees 30 1,158
-------------- --------------
Total Operating Expenses $ 606,966 $ 1,559,305
============== ==============
See Accompanying Notes and Accountant's Report
<PAGE>
ACCU CHEM CONVERSION, INC.
STATEMENT OF CASH FLOWS
For Three and Nine Months Ending September 30, 1999
(Unaudited)
Three Months
ending Year To
Sept. 30, 1999 Date
-------------- --------------
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $ 76,283 $ 145,153
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and Amortization 27,020 78,055
(Increase) Decrease in: 8,398 23,910
Accounts Receivable (45,171) (81,022)
Employee Advance 497 (2,038)
Inventory (5,133) 3,912
Prepaid Expenses 42,335 (20,523)
Reimbursable Charges - (11,385)
Deposits (8,450) (17,032)
Increase (Decrease) in:
Accounts Payable (21,239) (131,563)
Accrued Expenses (12,644) 73,525
Income Tax Payable 45,866 83,269
-------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 99,364 120,352
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment (44,767) (144,165)
-------------- --------------
NET CASH USED BY INVESTING ACTIVITIES (44,767) (144,165)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Proceeds from (Payments to) Notes
Payable (1,810) 82,190
-------------- --------------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES (1,810) 82,190
-------------- --------------
NET INCREASE (DECREASE) IN CASH 52,787 58,377
BEGINNING OF PERIOD 3,494 (2,096)
-------------- --------------
END OF PERIOD $ 56,281 $ 56,281
============== ==============
SUPPLEMENTAL DISCLOSURES:
Cash Paid During the Period for:
Interest $ 10,531 $ 31,854
============== ==============
Income Tax $ - $ 2,504
============== ==============
See Accompanying Notes and Accountant's Report
<PAGE>
ACCU CHEM CONVERSION, INC.
STATEMENT OF CASH FLOWS (Continued)
For Three and Nine Months ended September 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 equipment.
see accompanying notes and accountant's report
<PAGE>
ACCU CHEM CONVERSION, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE I - 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 an of September
30, 1999, and the results of operations and cash flows for the three months and
nine 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 September 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 in 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 nine months ended September 30, 1999 was $0 and
$250, respectively.
Inventory
Inventory is stated at cost with cost determined by the gross profit margin
method.
<PAGE>
ACCU CHEM CONVERSION, INC.
NOTES TO FINANCIAL STATEMENTS
(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 completed on the straight-line
and accelerated methods based on the estimated useful lives of the assets.
Depreciation expense for three and nine months ended September 30, 1999 was
$27,020 and $78,055, respectively.
Income Taxes
The Company accounts income taxes in accordance with Financial Accounting
standards Board Statement No. 109.
NOTE 2 - NOTES PAYABLE
As of September 30, 1999, Notes Payable consist of the following:
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 6,645
c.) Payable to Holtrachem, monthly payment
of $506.19, including interest at 8%
per annum, due October, 2000, secured
by automotive equipment 26,869
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 243,214
e.) Payable to a related party, interest
at 7% per annum, due December 31, 2008
secured by all Company assets 172,203
<PAGE>
ACCU CHEM CONVERSION, INC.
NOTES TO FINANCIAL STATEMENTS:
(Unaudited)
NOTE 2 - NOTES PAYABLE (Continued)
f.) Payable to a stockholder, interest
at 10% per annum, due on demand,
secured by all Company assets 9,400
g.) Payable to a stockholder, interest
at 10% per annum, due on demand,
secured by all Company assets 20,996
h.) Payable to a related party, no
interest accrued, due on demand 41,000
i.) Payable to a Vendor, commencing
October 1, 2000, secured by equipment 19,919
j.) Payable to a stockholder, interest
at 10% per annum, due on demand, unsecured 9,700
----------
$ 637,106
Less current maturities (224,464)
Long-term debt, net $ 412,642
----------
Maturities on notes payable are as follows:
December 31,
------------
1999 $191,564
2000 70,950
2001 50,441
2002 55,172
2003 and over 268,979
---------
$637,106
=========
NOTE 3 - INCOME TAXES
As of September 30, 1999, income tax provision is comprised of the following:
Federal Tax $ 65,337
State Tax 20,436
----------
$ 85,773
Deferred income taxes are provided on temporary difference between book and tax
income, arising primarily from the recognition of contingency loss. (See Note 5)
<PAGE>
ACCU CHEM CONVERSION, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 INCOME TAXES (Continued)
The Company has a Federal not operating loss carryforward of $66,807 which will
expire in 2017.
NOTE 4 - RELATED PARTY TRANSACTION$
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 in not
ascertainable at this time. No provision has been made in the financial
statements related to this claim. However, the Company had accrued the lose in
the 1997 income tax return; as a result, deferred income tax is provided for the
difference. (See Note 3)
In September 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 the year end tax return.
<PAGE>
ACCU CHEM CONVERSION, INC.
NOTES TO FINANCIAL STATEMENTS
(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-mouth 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 nine months ended September 30,
1999 was $17,300 and $50,800, respectively. The shareholders have purchased 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 mouth 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 nine months ended September 30, 1999 was
$50,287 and $137,922, respectively.
Minimum rental payments as of September 30, l999 are as follows:
1999 $ 12,000
2000 12,000
---------
$ 24,000
---------
Payroll Tax Liability
The officers of the Company negotiated the prior years' payroll tax assessment
with IRS. As of September 1999, the Company had paid $30,l55 which flow through
the operations.
NOTE 6 - YEAR 2000
The Year 2000 issue is the result of shortcomings in many electronic data
processing systems and other electronic equipment that may adversely affect the
Company's operations as early as fiscal year 1999.
The Company had assessed its various types of electronic equipment and does not
believe the Year 2000 issue will pose significant operational problems.
<PAGE>
ACCU CHEM CONVERSION, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 - PLAN OF REORGANIZATION
On April 1, 1999, the Company entered into a plan of reorganization agreement
with Quadratech, Inc. (a Nevada public corporation). The agreement provided that
the company will sell 83.33% shares of its outstanding and issued common stock
in exchange for 15,000,000 shares of common stock of Quadratech, Inc. This
transaction will be accounted for as a purchase, and accordingly, the purchase
price was allocated to the net assets acquired base on their net book values and
the excess cost over the net assets acquired will be recorded as goodwill.
Reorganization was finalized on October 1, 1999.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 58,019
<SECURITIES> 0
<RECEIVABLES> 428,510
<ALLOWANCES> 0
<INVENTORY> 141,590
<CURRENT-ASSETS> 753,274
<PP&E> 1,211,222
<DEPRECIATION> 496,912
<TOTAL-ASSETS> 1,520,911
<CURRENT-LIABILITIES> 942,588
<BONDS> 0
0
0
<COMMON> 39,513
<OTHER-SE> 74,668
<TOTAL-LIABILITY-AND-EQUITY> 1,520,911
<SALES> 2,369,319
<TOTAL-REVENUES> 2,366,307
<CGS> 366,218
<TOTAL-COSTS> 2,068,621
<OTHER-EXPENSES> 302,005
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,842
<INCOME-PRETAX> (4,319)
<INCOME-TAX> 86,573
<INCOME-CONTINUING> (90,892)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (90,892)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
