ITEM 1 - BUSINESS
Quad Metals Corporation (the "Company" or the "Registrant") is a Washington corporation incorporated in 1968. The Company was formed to acquire interests in mining properties and explore for precious metals and other commercial minerals. The Company was unsuccessful in its activities and has been substantially inactive since 1991. During 1998, the Company reinstated its corporate charter in the State of Washington and began efforts to favorably position itself to seek alternative business opportunities.
The Company's Board of Directors intends to bring the Company into compliance with securities regulations, with the ultimate goal of merging the Company with another business entity. As such, the Company can be defined as a "shell" company, whose sole purpose at this time is to locate and consummate a merger or acquisition with a private entity. The proposed business activities described herein classify the Registrant as a "blank check" company. Many states have enacted statutes, rules and regulations limiting the sale of securities of "blank check" companies in their respective jurisdictions.
RISK FACTORS
The Company's business is subject to numerous risk factors, including the following:
Independent Certified Public Accountants' Opinion - Going Concern - ------------------------------------------------------------------------
The Company's financial statements for the years ended December 31, 2000 and 1999, were audited by the Company's independent certified public accountants, whose report includes an explanatory paragraph stating that the financial statements have been prepared assuming the Company will continue as a going concern and that the Company has incurred significant operating losses and has stockholders' and working capital deficiencies that raise substantial doubt about its ability to continue as a going concern.
No Revenue and Minimal Assets - ---------------------------------
The Company has had no revenues or earnings from operations. The Company has no significant assets or financial resources. The Company will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a business combination.
QUAD METALS CORPORATION FORM 10KSB
Scarcity of and Competition for Business Opportunities and Combinations - -------------------------------------------------------------------------------
The Company is and will continue to be an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private entities. A large number of established and well-financed entities, including venture capital firms, are active in mergers and acquisitions of companies which may be desirable target candidates for us. Nearly all such entities have significantly greater financial resources, technical expertise and managerial capabilities than the Company and, consequently, the Company will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. Moreover, the Company will also compete in seeking merger or acquisition candidates with numerous other small public companies.
Continued Management Control, Limited Time Availability - ------------------------------------------------------------
While seeking a business combination, management anticipates devoting up to twenty hours per month to the business of the Company. The Company's officers have not entered into written employment agreements with the Company and are not expected to do so in the foreseeable future.
Conflicts of Interest - General - -----------------------------------
The Company's officers and directors participate in other business ventures which compete directly with the Company. Additional conflicts of interest and non-arms length transactions may also arise in the future in the event the company's officers or directors are involved in the management of any firm with which the Company transacts business.
Probable Change in Control and Management - ----------------------------------------------
A business combination involving the issuance of the Company's stock will, in all likelihood, result in shareholders of a private company obtaining a controlling interest in the Company. The resulting change in control of the Company will likely result in removal of one or more present officers and directors of the Company and a corresponding reduction in or elimination of their participation in the future affairs of the Company.
Reduction of Percentage Share Ownership Following Business Combination - -----------------------------------------------------------------------------
The Company' primary plan of operation is based upon a business combination with a private concern which, in all likelihood, would result in the Company issuing securities to shareholders of such private company. The issuance of previously authorized and unissued common stock of the Company would result in reduction in percentage of shares owned by present and prospective shareholders of the Company and would most likely result in a change in control or management of the Company.
QUAD METALS CORPORATION FORM 10KSB
Employees - ---------
The Company has no paid employees. None of the Company's executive officers are employed by the Company. Management services are provided on an "as needed" basis without compensation, generally less than five hours per week. The Company has no oral or written contracts for services with any member of management.
ITEM 2
ITEM 2 - PROPERTIES
At December 31, 2000, the Company had no properties.
ITEM 3
ITEM 3 - LEGAL PROCEEDINGS
The registrant has no legal actions pending against it and is not a party to any suits in any court of law.
ITEM 4
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during 2000.
PART II
ITEM 5
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock has been inactive for several years and there is currently not a public trading market for the Company's common stock on any organized exchange.
Holders. The number of stockholders of record on March 1, 2002 was approximately 942.
Dividends. The Company has declared no cash or stock dividends on its common stock since inception and does not anticipate declaring or paying cash or stock dividends in the future.
ITEM 6
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PLAN OF OPERATIONS
The Company's purpose is to seek, investigate and, if such investigation warrants, acquire an interest in business opportunities presented to it by persons or firms who or which desire to seek the perceived advantages of an Exchange Act registered corporation. The primary method the Company will use to find potential merger or acquisition candidates will be to run classified ads seeking companies, which are looking to merge with a public shell.
Management of the Company, while not especially experienced in matters relating to the new business of the Company, will rely primarily upon their own efforts to accomplish the business purposes of the Company. It is not anticipated that any outside consultants or advisors, other than the Company's legal counsel and accountants, will be utilized by the Company to effectuate its business purposes described herein.
QUAD METALS CORPORATION FORM 10KSB
FINANCIAL CONDITION AND LIQUIDITY
During the year ended December 31, 2000 no cash was generated or used by operating activities of the Company. The Company has no recurring revenue from operating activities and plans to fund its future operations through sales of its unregistered common stock, although there can be no assurance the Company will be successful in its efforts to sell its common stock.
ITEM 7
ITEM 7 - FINANCIAL STATEMENTS
Report of DeCoria, Maichel & Teague P.S., Independent Accountants 7
Balance Sheets, December 31, 1999 and 1998 8
Statements of Operations for the years ended December 31, 1999 and 1998 9
Statements of Changes in Stockholders' Deficit for the years ended December 31, 1999 and 1998 10
Statements of Cash Flows for the years ended December 31, 1999 and 1998 11
Notes to Financial Statements 12-14
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors Quad Metals Corporation Spokane, WA
We have audited the accompanying balance sheets of Quad Metals Corporation ("the Company") as of December 31, 2000 and 1999, and the related statements of operations, stockholders' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Quad Metals Corporation as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company's operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
DeCoria, Maichel & Teague P.S.
/s/: DeCoria, Maichel & Teague P.S.
Spokane, Washington November 19, 2001 Except for Note 4 which is dated December 15, 2001
QUAD METALS CORPORATION BALANCE SHEETS December 31, 2000 and 1999
ASSETS
2000 1999 ------------ ------------ Total assets $ 0 $ 0 ============ ============
LIABILITES AND STOCKHOLDERS' DEFICIT
Current liabilities: Accounts payable $ 2,944 $ 2,885 ------------ ------------
Total liabilities 2,944 2,885 ------------ ------------
Stockholders' deficit: Common stock, no par value; 40,000,000 shares authorized, 35,474,665 shares issued and outstanding 2,192,824 2,192,824 Accumulated deficit (2,195,768) (2,195,709) ------------ ------------
Total stockholders' deficit (2,944) (2,885) ------------ ------------
Total liabilities and stockholders' deficit $ 0 $ 0 ============ ============
The accompanying notes are an integral part of the financial statements.
QUAD METALS CORPORATION STATEMENTS OF OPERATIONS For the years ended December 31, 2000 and 1999
2000 1999 ------------ ------------
Operating expenses: Legal expense $ 59 $ 61 ------------ ------------
Net loss $ 59 $ 61 ============ ============
Net loss per common share $ Nil $ Nil ============ ============
Weighted average common shares outstanding-basic 35,474,665 35,474,665 ============ ============
The accompanying notes are an integral part of the financial statements.
QUAD METALS CORPORATION STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT For the years ended December 31, 2000 and 1999
COMMON STOCK -------------------------- ACCUMULATED SHARES AMOUNT DEFICIT TOTAL ------------ ------------ ------------ ----------- Balance, December 31, 1998 35,474,665 $ 2,192,824 $(2,195,648) $ (2,824)
Net loss (61) (61) ------------ ------------ ------------ -----------
Balance, December 31, 1999 35,474,665 2,192,824 (2,195,709) (2,885)
Net loss (59) (59) ------------ ------------ ------------ ----------- Balance, December 31, 2000 35,474,665 $ 2,192,824 $(2,195,768) $ (2,944) ============ ============ ============ ===========
The accompanying notes are an integral part of the financial statements.
QUAD METALS CORPORATION STATEMENTS OF CASH FLOWS For the years ended December 31, 2000 and 1999
2000 1999 ------------ ------------
Cash flows from operating activities: Net loss $ (59) $ (61)
Change in: Accounts payable 59 61 ------------ ------------
Net cash used by operating activities 0 0 ------------ ------------
Net change in cash 0 0
Cash, beginning of year 0 0 ------------ ------------
Cash, end of year $ 0 $ 0 ============ ============
The accompanying notes are an integral part of the financial statements.
QUAD METALS CORPORATION NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Quad Metals Corporation (the "Company") is a Washington corporation incorporated in 1968. The Company was formed to acquire interests in mining properties and explore for precious metals and other commercial minerals. The Company was unsuccessful in its activities and has been substantially inactive since 1991.
During 1998, the Company reinstated its corporate charter in the State of Washington and began efforts to favorably position itself to seek alternative business opportunities.
These financial statements are presented on the basis that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time. The Company has incurred operating losses since its inception, has no recurring source of revenue, and has an accumulated deficit. These conditions raise substantial doubt as to the Company's ability to continue as a going concern.
Management's plans for the continuation of the Company as a going concern include financing the Company's operations through sales of its unregistered common stock and the eventual acquisition of an entity with profitable business operations. There are no assurances, however, with respect to the future success of these plans. The financial statements do not contain any adjustments, which might be necessary, if the Company is unable to continue as a going concern.
Unless otherwise indicated, amounts provided in these notes to the financial statements pertain to continuing operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates - ------------------
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Income Taxes - -------------
Income taxes are recognized in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," whereby deferred income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.
Fair Values of Financial Instruments - ----------------------------------------
The carrying amounts of financial instruments, including accounts payable, approximated their fair values as of December 31, 2000, and 1999.
QUAD METALS CORPORATION NOTES TO FINANCIAL STATEMENTS, CONTINUED:
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Loss Per Share - ----------------
Such amounts, representing basic and diluted loss per share, are computed based on the weighted average number of shares outstanding during the years ended December 31, 2000 and 1999.
Mining Properties - ------------------
In prior years the Company owned or controlled properties on private and public lands in several states in the Western United States for purposes of exploring for and developing commercial mineral deposits. The Company's exploration efforts on its properties proved unsuccessful, and as of December 31, 1991, the Company had abandoned all of its interests in mineral and mining properties. The Company and its properties have been subject to a variety of federal and state regulations governing land use and environmental matters. The Company's management believes it has been in substantial compliance with all such regulations, and is unaware of any pending action or proceeding relating to regulatory matters that would affect the financial position of the Company.
New Accounting Pronouncements - -------------------------------
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement requires the Company to recognize all derivatives on the balance sheet at fair value. The Company anticipates that the adoption of this statement will not have a material affect on its financial statements.
3. INCOME TAXES
At December 31, 2000 and 1999, the Company had federal tax-basis net operating loss carryforwards totaling approximately $1,420,000, which will expire in various amounts through 2020. The deferred tax asset associated with these operating loss carryforwards is approximately $483,000 for the years ended December 31, 2000 and 1999, and has been fully reserved for each of the years then ended, as management believes it is more likely than not that the deferred tax assets will not be utilized.
4. STOCKHOLDERS' DEFICIT
Common Stock - -------------
The Company has one class of no par value common stock authorized and outstanding. During a meeting of shareholders on March 15, 1984, the Company's Articles of Incorporation were amended to increase the number of shares authorized for issue from 10,000,000 to 40,000,000. During an annual meeting of shareholders ordered by the Superior Court of the State of Washington on September 17, 1998, the articles of incorporation were again amended to increase the number of shares authorized for issue to 100,000,000. The amendment took effect upon its filing with the Secretary of the State of Washington in December of 2001. In prior years the Company's stock was traded on the Spokane Stock Exchange in Spokane, Washington. Since 1990, however, very little trading has taken place, and there is essentially no active market for the Company's stock.
QUAD METALS CORPORATION NOTES TO FINANCIAL STATEMENTS, CONTINUED:
4. STOCKHOLDERS' DEFICIT (CONTINUED)
Preferred Stock - ----------------
During the annual meeting of shareholders on September 17, 1998, the Company's Articles of Incorporation were amended to authorize 10,000,000 shares of no par value preferred stock. The preferred stock is entitled to preference over common stock of the Company with respect to the distribution of assets in the event of liquidation or dissolution. The preferred stock may be divided into and issued in designated series as determined by the Company's board of directors. The amendment took effect upon its filing with the Secretary of the State of Washington in December of 2001.
5. RELATED PARTY TRANSACTIONS
The Company has been furnished with certain unreimbursed management, administrative, accounting and consulting services by various related parties, which are not reflected in these financial statements and not material to the financial statements. For the years ended December 31, 2000 and 1999, the Company expended, $59 and $61, respectively, for legal services provided by Gregory B. Lipsker, the Company's legal counsel and an officer and director. At December 31, 2000 and 1999, the Company had accrued $2,944 and $2,885, respectively, to Mr. Lipsker for legal services provided.
During 2001, the Company sold 1,500,000 shares of its unregistered common stock to Mr. Lipsker for $0.001 per share, or $1,500. The Company also sold 24,500,000 shares of its unregistered common stock to existing directors for $0.001 per share or $24,500. Both of the aforementioned sales were pursuant to an offering that was exempt from securities registration (See Note 6).
6. SUBSEQUENT EVENT
In October of 2001, the Company's board of directors resolved to offer up to 60,000,000 shares of its common stock, in a private placement, to certain accredited investors. The offering, which was exempt from registration under the Securities Act of 1933 ("the Act") pursuant to Section 4(2) of the Act and Rule 506 of Regulation D, resulted in the sale of 60,000,000 shares of the Company's unregistered common stock for $0.001 per share, or $60,000. Proceeds from the offering are to be used to fund general and administrative activities necessary to reestablish the Company's compliance with securities regulations and investigate potential business opportunities with other entities.
QUAD METALS CORPORATION FORM 10KSB
ITEM 8
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 9
ITEM 9 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors and Executive Officers.
The names, ages, business experience and positions of our directors and executive officers as of December 31, 2000, are set out below. The Company's board of directors consisted of three members at such date. All directors serve until their successors are elected and qualified.
NAME AGE POSITION - --------------------------- --- ---------------------------------------------- Gregory B. Lipsker 50 President and a director Eunice R. Campbell 55 Secretary, Treasurer and a director William R. Green 62 Vice-President and a director
Each Officer serves in the position indicated after his name for a period of one year or until his successor is elected and qualified.
Biographies of Directors, Executive Officers, and Key Individuals.
Gregory B. Lipsker.
Mr. Lipsker is a practicing attorney in Spokane, Washington. Mr. Lipsker's practice emphasizes corporate and securities matters. Mr. Lipsker is an executive officer of Metaline Mining and Leasing Company a publicly held, inactive mining exploration company.
Eunice R. Campbell.
Mrs. Campbell is a retired businesswoman. Prior to her retirement in 1987, Mrs. Campbell was the owner of Spokane Guaranty Company, a stock transfer agency. Mrs. Campbell is an executive officer and director of Metaline Mining and Leasing Company a publicly held, inactive mining exploration company.
Dr. William R. Green.
William R. Green is a mining engineer and geologist, and was a professor of mining engineering at the University of Idaho from 1965-1983. He has been actively involved in the mining business since 1962 and is a former officer and director of Yamana Resources and currently an officer and director of Canadian public companies: Maya Gold Limited and Petromin Resources, Ltd., and US Companies Mines Management, Inc., and Metaline Mining and Leasing, Co., both publicly held companies, the latter being an inactive mining exploration company.
Involvement in Certain Legal Proceedings
None of the Officers and Directors of the Registrant has been involved in any bankruptcy, insolvency or receivership proceedings as an individual or a member of any partnership or corporation; none has been convicted in a criminal proceeding.
QUAD METALS CORPORATION FORM 10KSB
ITEM 10
ITEM 10 - EXECUTIVE COMPENSATION
No officer receives any compensation for services rendered to the Company. Directors receive no annual compensation nor attendance fees for servicing in such capacity.
ITEM 11
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of December 31, 2000, the names of, and number of shares beneficially owned, by persons known to us to own more than five percent (5%) of our common stock; the names of, and number of shares beneficially owned by each of our directors and executive officers; and the number of shares beneficially owned by all of our directors and executive officers as a group. At such date, there were 35,474,665 outstanding shares.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (ALL DIRECT PERCENT NAME OF OWNER UNLESS OTHERWISE NOTED) OF CLASS - ------------------------------------- ----------------------------- ---------- The Estate of Dr. Tibor Klobusicky(1) 15,750,000 44.40% E.3612 16th Ave. Spokane, WA 99203
Stanley Harrison 10,000,000 28,19% E. 10900 Wolf Lodge Bay Road Coeur d' Alene, ID 83814
Elizabeth Klobusicky Mailender 2,250,000 6.34% Haupstrasse 58 7401 Remmingsheim West Germany
Iris Momber 2,250,000 6.34% E. 3612 16th Avenue Spokane, WA 99203
Nadine Young 2,250,000 6.34% 3804 Indigo Plano, TX 75075
Eunice R. Campbell (2) 1,268,000 3.57% 301 S. Chestnut #7 Spokane, WA 99204
All directors and executive Officers as a group (1 person) 1,268,000 3.57%
(1) Includes 3,000,000 shares of held of record and owned beneficially by the Estate of Tibor Klobusicky and 12,750,000 as to which Tibor Klobusicky claims beneficial ownership through the shares held of record by the Family of Dr. Tibor Klobusicky, The Klobusicky Family Trust, and the Klobusicky Family Partnership.
(2) Director and Secretary/Treasurer.
QUAD METALS CORPORATION FORM 10KSB
ITEM 12
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Notes 4, 5, and 6 to the Financial Statements.
ITEM 13
ITEM 13 - EXHIBITS, AND REPORTS ON FORM 8-K
(a) Exhibits
3 (i) Amended and restated Articles of Incorporation September 18, 1998* *As filed with the Registrant's 1998 annual report on Form 10-K.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the last quarter of 2000.
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QUAD METALS CORPORATION FORM 10KSB
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
QUAD METALS CORPORATION INC.
By: /s/ Robert W. O'Brien ------------------------ Robert W. O'Brien President Date: March 25, 2002
By: /s/ Michael L. McLaughlin ---------------------------- Michael L. McLaughlin Vice-President Date: March 25, 2002
By: /s/Martyn A. Powell --------------------- Martyn A. Powell Secretary/Treasurer Date: March 25, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By:/s/ Robert W. O'Brien ------------------------ Robert W. O'Brien Director and President Date: March 25, 2002
By:/s/ Michael L. McLaughlin ---------------------------- Michael L. McLaughlin Director and Vice-President Date: March 25, 2002
By: /s/Martyn A. Powell ----------------------- Martyn A. Powell Director and Secretary/Treasurer Date: March 25, 2002