U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q |
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| For the quarterly period ended February 28, 2010 |
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 000-53156
________________ |
QUADRA PROJECTS INC.
(Exact name of small business issuer as specified in its charter)
________________
NEVADA
(State or other jurisdiction of
incorporation or organization) | 45-0588917
(IRS employer
Identification No.) |
6130 Elton Avenue, Suite # 335, Las Vegas, NV, 89107
(Address of principal executive offices) |
1-888-597-8899
(Issuer’s telephone number) |
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. Yesx No¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer¨ | Accelerated filer¨ | Non-accelerated | Smaller reporting |
| | | filer¨ | companyx |
| | | (Do not check if a smaller | |
| | | reporting company) | |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes¨ Nox
As of February 28, 2010, 45,394,260 shares of the issuer’s Common Stock, $ 0.001 par value per share, were outstanding.
Transitional Small Business Disclosure Format Yes¨ Nox
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| Item 1. FINANCIAL STATEMENTS |
QUADRA PROJECTS INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 2010
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| QUADRA PROJECTS INC. |
| (A Development Stage Company) |
| CONSOLIDATED BALANCE SHEETS |
| |
| | February | November |
| | 28, 2010 | 30, 2009 |
| ASSETS | (Unaudited) | (Audited) |
| Current Assets: | | |
| Cash | $ 2,231 | $ 2,309 |
| Prepaid expenses | 238,500 | 212,000 |
| Total current assets | 240,731 | 214,309 |
| |
| Total Assets | $ 240,731 | $ 214,309 |
| |
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | | |
| |
| Current Liabilities: | | |
| Advances from affiliate | $ 17,159 | $ 127,143 |
| Amounts due to affiliate for services | 198,000 | 137,857 |
| Accrued expenses | 9,825 | 4,825 |
| Due to shareholder | 69,936 | 69,936 |
| Advances from customer | 60,000 | 47,000 |
| Total current liabilities | 354,920 | 386,761 |
| |
| |
| Shareholders’ Deficit: | | |
| Common shares: authorized 750,000,000 shares of $0.001 par | | |
| value; issued and outstanding, 45,394,260 and 33,199,260 | 45,394 | 33,199 |
| shares, respectively | | |
| Preferred Class A shares – 20,000,000 shares of $ 0.001 par | 800 | 800 |
| value; issued and outstanding, 800,000 shares | | |
| Capital in excess of par value | 5,558,349 | 4,987,544 |
| Deficit accumulated during development stage | (5,718,732) | (5,193,995) |
| Total Shareholder’s Deficit | (114,189) | (172,452) |
| |
| Total Liabilities and Shareholders’ Deficit | $ 240,731 | $214,309 |
| |
| These accompanying notes are an integral part of these financial statements. | |
| -F1- |
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QUADRA PROJECTS INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE
(Unaudited)
| | | | June 7, 2007 |
| | | | (Date of Inception |
| | Three Month Period Ended | of Development |
| | February 28, | Stage) |
| | | | to |
| | 2010 | 2009 | February 28, 2010 |
| |
| Revenue | $ - | $ - | $ - |
| |
| Expenses: | | | |
| Administrative Expenses | 524,737 | 11,113 | 5,718,732 |
| |
| Net loss | $ (524,737) | $ (11,113) | $ (5,718,732) |
| |
| Loss Per Share - | | | |
| Basic and Diluted | $ (.01) | $ - | |
| |
| Weighted average number | 39,125,259 | 30,500,000 | |
| of shares outstanding | | | |
| Included within expenses are the following: |
| |
| |
| | Three month periods ended February 28, |
| | 2010 | 2009 |
| |
| Consulting fees | $ 484,500 | $ - |
| Investor relations | 15,000 | - |
| Testing expense | 13,000 | |
| Professional fees | 11,000 | 11,113 |
| Office and miscellaneous | 872 | - |
| Transfer agent fees | 365 | - |
| |
| Total | $ 524,737 | $ 11,113 |
These accompanying notes are an integral part of these financial statements.
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| QUADRA PROJECTS INC. |
| (A Development Stage Company) |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Unaudited) |
| |
| | | | June 7, 2007 |
| | Three | Three | (Date of |
| | Month | Month | Inception of |
| | Period | Period | Development |
| | Ended | Ended | Stage) To |
| | February | February | February 28, |
| | 28, 2010 | 28, 2009 | 2010 |
| |
| CASH FLOWS FROM OPERATIONS: | | | |
| Net loss | $ (524,737) | $ (11,113) | $ (5,718,732) |
| Reconciliation of net loss to cash flows from operating activities: | | | |
| Charges not requiring the outlay of cash: | | | |
| Stock Compensation Expense | - | - | 2,852,400 |
| Shares issued for consulting services | 79,500 | - | 586,643 |
| Excess cost of stock to settle debt obligations | - | - | 1,440,000 |
| Changes in assets and liabilities: | | | |
| Decrease in prepaid expenses | 212,000 | - | 212,000 |
| Increase in advances from affiliate | 198,000 | - | 335,857 |
| Increase in accrued expenses | 5,000 | 2,000 | 9,825 |
| Increase in advances from customer | 13,000 | - | 60,000 |
| |
| Net Cash Consumed by Operating Activities | (17,237) | (9,113) | (222,007) |
| |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
| Proceeds from affiliate loans | 17,159 | 6,000 | 169,302 |
| Repayments of affiliate loans | - | 5,000 | (25,000) |
| Proceeds of shareholder loans | - | - | 69,936 |
| Proceeds of sales of common stock | - | - | 10,000 |
| |
| Net Cash Provided by Financing Activities | 17,159 | 11,000 | 224,238 |
| |
| Net increase (decrease) in cash | (78) | 1,887 | 2,231 |
| |
| Cash balance, beginning of period | 2,309 | 5,384 | - |
| |
| Cash balance, end of period | $ 2,231 | $ 7,271 | $ 2,231 |
These accompanying notes are an integral part of these financial statements.
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QUADRA PROJECTS INC.
(A Development Stage Company)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2010
The unaudited consolidated interim financial statements of Quadra Projects Inc. and its wholly owned subsidiary ( the “Company”) as of February 28, 2010 and for the three month periods ended February 28, 2010 and 2009 and the period June 7, 2007 (date of inception) to February 28, 2010, have been prepared in accordance with generally accepted accounting principles. In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of such periods. The results of operations for the three month period ended February 28, 2010 are not necessarily indicative of the results to be expected for the full fiscal year ending November 30, 2010.
Certain information and disclosures normally included in the notes to financial statements have been condensed or omitted as permitted by the rules and regulations of the Securities and Exchange Commission, although the Company believes the disclosure is adequate to make the information presented not misleading. The accompanying unaudited financial statements should be read in conjunction with the financial statements of the Company for the fiscal year ended November 30, 2009.
2. SUPPLEMENTAL CASH FLOWS INFORMATION
There was no cash paid for either interest or income taxes during either of the periods presented. In addition, there were no non-cash investing or financing activities for either of the periods presented.
A total of 9,545,000 shares of common stock, valued at approximately $ 318,000 were issued in lieu of cash payment for consulting services to Paradigm Capital Corp and Alpha International Marketing Corp, of which $ 79,500 is shown as current expense on the Statement of Operations and $ 238,500 is shown as prepaid expense on the balance sheet. A total of 2,650,000 shares of common stock, valued at approximately $ 265,000 were issued to settle debt owed to an affiliate.
The accompanying balance sheets for February 28, 2010 and November 30, 2009 have been adjusted for the 2 for 1 stock split for which the Company filed notice with the Secretary of State of Nevada on April 16, 2009. The profit and loss statements for the three month periods ended February 28, 2010 and 2009 have been adjusted for both a prior 5 for 1 stock split and the 2 for 1 stock split previously mentioned.
4. CONTINGENCY
The Company does not carry insurance.
5. SHAREHOLDER LOANS |
The shareholder loans are non-interest bearing demand loans.
-F4-
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QUADRA PROJECTS INC.
(A Development Stage Company)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 2010
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Company has experienced losses, has a working capital deficiency of $ 114,189, has an accumulated deficit of $ 5,718,732 and does not presently have sufficient resources to accomplish its objectives during the next twelve months. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation. The Company’s present plans, the realization of which cannot be assured, are to raise necessary funds through shareholder loans.
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including, among other things:
| · | general economic and business conditions, both nationally and in our markets, |
| |
| · | our expectations and estimates concerning future financial performance, financing plans and the impact of competition, |
| |
| · | our ability to implement our growth strategy, |
| |
| · | anticipated trends in our business, |
| |
| · | advances in technologies, and |
| |
| · | other risk factors set forth herein. |
| |
In addition, in this report, we use words such as "anticipates," "believes," "plans," "expects," "future," "intends," and similar expressions to identify forward-looking statements.
Quadra Projects Inc. (the “Company”) undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this prospectus. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.
The Company was previously a distributor of an electronic non invasive acupuncture pen (the “Pen”) as an alternative to traditional needles used during acupuncture treatments. The Company previously had a distribution agreement which entitles the Company to market and sell the Pen on an exclusive basis throughout Asia (with the exception of China), Middle East and the Caribbean. The Company obtained its distribution rights through a company based in Taiwan. The Company entered into this distribution agreement on November 30, 2007 for a period of 10 years and have ancillary rights to the patent held in China through United. Operations were based in Taiwan, commencing June 2007. The Company did not generate revenues from appointed sub distributions and minimum quotas were not fulfilled. Upon further market research, it was determined that pursuing the marketing and sale of this product was not as profitable as previously projected. Therefore, all efforts relating to the distribution and marketing of the Pen were ceased.
Effective April 30, 2009, the Company completed its acquisition of its subsidiary, Quadra Energy Systems Inc. (“Energy Systems”). Energy Systems was incorporated under the laws of Belize and prior to being acquired, had no prior operating history with no assets, liabilities or equity. Energy Systems has an authorized capital of 50,000 common shares and has issued 5,000 shares to the Company for consideration of $ 5,000. The Company holds 100% of the outstanding shares of Energy Systems.
| Technology Purchase Agreement |
Effective April 30, 2009, Energy Systems completed its acquisition of Energy Conversion and Waste Disposal Technology (“Acquired Technologies”) from Quadra Marketing Corp. (“Quadra Marketing”) under the Technology Purchase Agreement (the “Agreement”).
Acquired Technologies consist of equipment and software for pyrolysis systems consisting of QES 2000S and QES Mobile Systems (the “Systems”) which is a non polluting energy conversion and waste disposal system
designed to convert organic waste to fuel and valuable by-products such as activated carbon, fertilizer, producing no air pollution or ash. The Systems are modular in design and fit into a 42 ft container.
Quadra Marketing has transferred to Energy Systems the title and rights of the Acquired Technologies along with engineering and design drawings, studies and reports and all information relating to the Acquired Technologies, whether written or oral and related technologies including the past, present and future versions software, computer programs, data and text (regardless of the form in which it including but not limited to the source code version thereof and the batch processor logic module) and all patent rights, copyrights, trade secret rights and other proprietary rights in and thereto including all documentation for the software, all technical documentation, system designs and specifications, flow charts, record and file layouts, memoranda, correspondence and other such documentation containing or relating to the design, structure or coding or testing of, or algorithms or routines used in, or errors discovered or corrected in, the software and any other type of inf ormation or material relating to the software and invention and related technology that was prepared by or forthe inventor of the Acquired Technologies.
Quadra Marketing acquired the rights to the Energy Conversion and Waste Disposal Technology from the inventor of such technologies on April 1, 2009. We have engaged the services of the inventor for sourcing the necessary components for construction of the QES Systems of which such components will be assembled by the inventor and technical staff. Our QES System and related technologies are patented in Taiwan under Patent No 285138, with pending patents No. 2006 10066751.9 and No. 2006 10072434.8 in the Peoples Republic of China and pending US patents No. 2007/0231073A1 and No. 2007/0231224A1. Patent application number 11/727,803 filed with the United States Patent Trademark Office for a reaction furnace utilizing high temperature steam and a re-circulated heat source to crack dioxin and organic substances contained in waste, being the basis of the our proprietary technology, has been granted by the United States Patent and Trademark Office effective the 15th day of December 2009 under patent number 7,632,471.
The Agreement provides that the use of the QES System and Acquired Technologies under Patent No. 285138 in Taiwan shall be operated through a Taiwanese Corporation with 40% ownership being allocated to the inventor and the remaining 60% retained by Energy Systems.
For consideration of our acquisition of the Acquired Technologies, we agreed to remit 10% of gross sales generated from use of the Acquired Technologies and 10% of the net proceeds of sales of the QES Systems to Quadra Marketing.
Our objective is to utilize the market of converting material generally recognized as having little or no value and which are or have been in the past, treated as waste and improperly discharged, discarded or dumped in landfills to saleable products. By offering an efficient, non-polluting, high quality and comparatively low cost pyrolytic and gasification system to treat the waste as feedstock, the QES System will convert the waste materials into marketable by-products or valuable energy sources - a relatively low cost solution for remediation of environmental problems worldwide.
It is our intention to market the QES System through joint ventures with qualified interests in establishing joint ventures and establishing waste conversion operations.
| Renewable Energy Capital LLC |
We are currently in ongoing negotiations to enter into a joint venture with Renewable Energy Capital LLC, a company involved in solar energy installations and an undisclosed supplier of tires, to establish a Waste Tire Conversion Plant. No assurance can be provided that the joint venture will be completed on terms acceptable to our company or will be completed at all.
| Canda Green Industry Inc. |
On December 14, 2009, we signed a Memorandum of Understanding (“MOU”) to enter into a joint venture agreement with Canda Green Industry Inc. ("Canda"), a Chinese real estate development company that has been
appointed to develop a large high technology park in the Dalian-Jinzhou District of Liaoning Province to service ecological and environmental industries. The purpose of the proposed joint venture is to establish a plant in China for the assembly of the QES System which will be utilized to process primarily MSW and used tires in the scientific park and elsewhere in China.
Canda is also principals of the Jinda Group involved in industries ranging from real estate development, manufacturing of wood products, electronics, restaurant and hotel operations to sand blasting etc.
We are further negotiating with Canda to determine what documentation and projections are required so that Canda can finalize financing for the joint venture's proposed assembly of MSW and waste tire conversion plant in China. We are currently preparing a MOU to cover these proposed arrangements. No assurance can be provided that the joint venture will be completed on terms acceptable to our company or will be completed at all.
On December 30, 2009, we entered into a Letter of Intent with Bio Earth Inc. ("Bio Earth") to jointly market quality carbon black produced by our joint venture operations in Malaysia and Indonesia. In particular, Bio Earth has a relationship with the Government of Bangladesh which is one of the prospective purchasers. Bio Earth also has end user customers for carbon black in Australia and other countries in South East Asia. The Letter of Intent calls for the purchasing of all of the carbon black produced from the processing of palm husks from our joint venture operations in Malaysia and Indonesia.
The Letter of Intent further provides for an equal division of profits from the joint marketing efforts equal to the difference of the purchase price paid for the carbon black and the selling price to end users of the product in South East Asia.
Representatives of Bio Earth have recently met with government officials of Bangladesh to finalize arrangements for financing for their environmental water and soil remediation programs for cleaning up sludge deposited in their major rivers and all forms of land based wastes, which are a major pollutant and environmental hazard for Bangladesh. BioEarth has incorporated into its cleanup program the use of the QES System technology for the processing of the sludge and land based wastes.
Once the sludge has been retrieved from the rivers through BioEarth's use of barges and sludge retrieval equipment; the processing of the sludge by our QES Systems will convert the sludge and/or land based wastes into marketable by products and/or alternatively a source for the generation of power with the use of our gasification technology.
| Avani Corporation, Zhunger Capital Partners Inc. |
On October 28, 2009, Energy Systems entered into an agreement with Avani Corporation SDN BHD (“Avani”) of Malaysia, and Zhunger Capital Partners Inc. (“Zhunger”) of Taiwan, to exclusively market the QES System conversion system in Korea, Cambodia, Thailand, Malaysia, Indonesia, Saudi Arabia and Egypt (the“Avani/Zhunger Territories”). The agreement also provides that Avani and Zhunger may establish joint ventures with third parties for the establishment of an assembly facility and/or manufacturing plant in the Avani/ Zhunger Territories. Avani and Zhunger will also be granted rights to locate and appoint key distributors and agents.
Energy Systems shall grant Avani and Zhunger the right to locate and appoint key distributors and agents, wherein this will also include the granting of a right to the distributors and agents to, use and demonstrate the QES System, when one is manufactured for the Avani/Zhunger Territories, advertise, market, sell and otherwise distribute the QES System in the Avani/Zhunger Territories to customers who are end users and/or joint venture partners, advertise, market, sell, and otherwise distribute the QES System in the Avani/Zhunger Territories to sub-distributors or sub-agents for further distribution to end users and/or joint venture partners, screen and select a funding group to joint venture in the establishment of an assembly facility and/or manufacturing plant in the Avani/Zhunger Territories for the QES System. The agreement is effective October 30, 2009 for a term of 20 years.
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The Joint Venture with Avani would involve the building of several plants to process palm husks in Malaysia and Indonesia. Currently each palm oil plant operating in Malaysia and Indonesia, after extraction of the palm oil, generates between 300 to 1,000 tons of palm husk remnants per day creating a major disposal problem for each palm oil plant. We offer an environmentally friendly solution for dealing with the palm husks by creating marketable by products such as N220 grade carbon black, using the QES System.
| US Waste Tire Plant Operations |
We are in the final stages of completing a long term supply agreement for waste tires for our proposed waste tire plant in the US. Negotiations are expected to be concluded with a 20 year fixed supply agreement. The supply of waste tires will facilitate operations in Joint Ventures established to construct plants for waste tire conversion to carbon black and diesel fuel.
The component parts of the QES System will be outsourced and assembled by our technical team. We intend to build plants to process used tires either through a joint venture or solely owned and operated plants. Currently we are negotiating a joint venture initiative with a prospective partner with an extensive financial background with access to financing as well as waste tires. A plant is tentatively planned to be built in Partrich Alabama.
No assurance can be provided that the joint venture will be completed on terms acceptable to our company or will be completed at all.
Our marketing strategy currently implemented throughout China Hong Kong and Macau is through joint efforts with our distributor Fanta International Enterprises (Canada) Inc (“Fanta”). Fanta is an exclusive distributor in these territories. Fanta is subject to performance quotas. We have marketed the QES System in the Caribbean and have entered into a sales agreement with Imex International Corp. (“Imex”) for Imex to purchase one Utility Unit subject to various terms. The agreement with Imex does not provide any exclusive distribution or operation rights and Imex is not subject to any performance quotas.
| Distribution Agreement – China, Hong Kong, Macau |
On July 20, 2009, Energy Systems entered into an agreement (the “Fanta Agreement”) with Fanta wherein Fanta was appointed as exclusive distributor of the QES System in China, Hong Kong and Macau (the “Fanta Territory”), for a term of 2 years which such term could be extended for an additional 2 year term, provided that Fanta achieves its minimum purchase requirements of one QES System in year 1, three QES Systems in year 2 and ten QES Systems in years 3 and year 4. Thereafter any renewal terms would be subject to mutually acceptable terms, provided however if the parties fail to agree on terms of any renewal, then Energy Systems shall have right to determine the conditions of any subsequent renewal. Provided however, nothing contained herein shall prohibit or restrict Energy Systems or its affiliated companies to be incorporated in Taiwan, or its affiliated companies from establishing their own or joint venturing with third parties a total maximum of ten QES Systems for use in plants in the Fanta Territory.
The Fanta Agreement provides that Fanta can appoint a network of sub-distributors in the Fanta Territory to assist Fanta in the sales and servicing required of the QES Systems in the Fanta Territory. The Fanta Agreement further provides Fanta shall establish a full service distribution and parts center, service maintenance team, sales team to support the sales of QES System in the Fanta Territory and to jointly promote the marketing of the QES System with Energy Systems.
On November 9, 2009, we entered into a development and marketing agreement (“Fanta Marketing Agreement”) with Fanta for the purchase of one QES2000 utility unit (“Utility Unit”) for the purchase price of $ 420,000. Included in this total is a $ 360,000 marketing expense of which was credited to Fanta to assist Fanta in setting up distribution networks and marketing of the QES System in China. The Utility Unit will encompass all applications of the QES System. The Utility Unit is smaller in scale, mobile and will have a lower processing rate compared to the full size QES System. The Utility Unit operates on a batch system and can process 50kg per
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hour of waste. It has a manual loading and unloading system. With additional equipment installed, the Utility Unit can operate as a continuous system that can process 200kg per hour.
On December 17, 2009, the Utility Unit was completed. The Utility Unit is currently undergoing independent testing by SGS Group, a company specializing in inspection, verification, testing and certification. It is anticipated that testing will be completed May 2010. The Utility Unit is currently available for demonstration purposes at the Dalian - Jinzhou High Technology Park. The demonstration of the Utility Unit will be shown to prospective customers of Fanta and senior government officials, and joint venture partners. Our prospective joint venture partner Canda will be co-hosting the demonstration in its facilities in the Jinzhou High Technology Park.
Initially, the Utility Unit will be used for demonstration purposes to confirm the technical and commercial viability of the technology to interested buyers desiring verification of the technology. As per the Fanta Agreement, we will be granted rights to demonstrate the Utility Unit to prospective buyers upon delivery of the Utility Unit to Fanta’s premises.
| Sales Agreement – Jamaica, West Indies |
On February 15, 2010, we entered into a sales agreement with Imex International Corp. (“Imex”), a Nevada Corporation the purchase of one Utility Unity at a cost of $450,000 and additional equipment for $ 200,000, subject to verification of the technical and commercial viability of the Utility Unit currently available for demonstration in China as mentioned above. The agreement was an arms length transaction. Imex intends on developing waste conversion and disposal centers in Jamaica, West Indies, utilizing waste tires for conversion to fuel oil and carbon black and to also provide a safe method of disposing of organic waste materials.
The purchase of the Utility Unit is subject to us providing a report from an independent party, being SGS Group, (the “Report”) that verifies that the Utility Unit properly meets the claims that we have made; that is, that the Utility Unit functions as a pyrolysis system technology for energy conversion waste disposal method with an efficient method of converting waste organic materials into marketable energy products or by-products or an efficient method of disposing of waste organic materials in a safe, non polluting, non toxic method compatible with environmental standards (the “Functional Claim”).
We must provide the Report to Imex within five business days of receipt by us of the Report, which we expect to receive in May 2010. Upon receipt of the Report, Imex shall have five business days in which to review the Report and provide written confirmation to us as to whether Imex wishes to proceed with the acquisition of the Utility Unit. Imex may at its sole discretion, cancel the agreement in the event that the Report does not fully support the Functional Claim. Imex is not subject to any performance quotas and does not have exclusive rights to distribute or operate in Jamaica, West Indies.
Other Agreements:
Finder’s Fee Agreement |
On April 30, 2009, the Company signed an addendum to the Finders Fee Agreement with Magnum Group International Inc. (“Magnum”) with the original agreement dated January 5, 2009. The addendum states that Magnum has sourced the Acquired Technologies initially to Quadra Marketing on April 1, 2009 and subsequently to Energy Systems under the terms of the Technology Purchase Agreement dated April 30, 2009. Magnum shall source financing on a best efforts basis for the construction of the Systems and market the Systems on a worldwide basis under the direction of the Company and Energy Systems.
Energy Systems intends to construct Systems using the Acquired Technologies for use in commercial operations and will also outright sell the Systems.
The finder’s fee of $ 150,000 was paid in addition to various amounts owing to Magnum by issuance of common and preferred shares. As per our amended agreement with Magnum entered into on August 31, 2009, Magnum will receive consideration Ten Per Cent (10%) of all the gross proceeds received by us or Energy Systems resulting from direct sales, joint ventures and/or from plants operated by us or Energy Systems for the QES System and ancillary equipment, and enhancements. In addition, 5% of gross proceeds from investors acquiring
private placements, or investments shall be remitted to Magnum.
The Finders Fee Agreement is for a term of 20 years commencing August 31, 2009.
Energy Systems entered into a Consulting Agreement with Magnum whereas Magnum will provide consulting services relating to a accounting and corporate governance, assistance in compliance with international and domestic financing, domestic, international taxation, Federal and state securities laws, and secondary securities trading, assistance with business acquisitions and dispositions and matters of general and special law. The term of the agreement is for five years with an effective commencement date of June 15, 2009. In consideration of services performed by Magnum, Energy Systems shall pay the consultant fee of $ 60,000 per month.
On October 23, 2009, we initially entered into a consulting agreement with Paradigm Capital Corporation of Taiwan, for corporate and marketing consulting in Asia. Pursuant to the terms of the agreement Paradigm agreed to provide assistance on corporate structure and specific projects, including and relating to marketing, road show presentations and related matters. The agreement was effective from October 23, 2009 to January 31, 2010 with an option at our discretion to extend the term until May 31, 2010. On January 27, 2010, the consulting agreement with Paradigm was extended to May 31, 2010.
On October 28, 2009, we initially entered into a consulting agreement with Alpha International Marketing Corp. of Chile, for corporate and marketing consulting in Asia, North America, South America and the Caribbean to provide assistance on corporate structure and specific projects, including and relating to marketing, road show presentations and related matters. The agreement was effective from October 28, 2009 to January 31, 2010 with an option at our discretion to extend the term until May 31, 2010. On January 27, 2010, the consulting agreement with Alpha was extended to May 31, 2010.
Amendment to Articles of Incorporation – Preferred Shares
Our Amended Articles of Incorporation (the "Articles") currently authorize the issuance of 750,000,000 shares of common stock, $.001 par value, and no shares of preferred stock. On July 22, 2009 our Board of Directors approved, subject to receiving the approval of a majority of the shareholders of our common stock, an amendment to our Articles to authorize the issuance of up to 750,000,000 shares of preferred stock.. The shareholder approval was obtained and a Form 14C was filed with the Securities and Exchange Commission on August 14, 2009. The Board of Directors has designated 20,000,000 of those authorized preferred shares as “Series A” preferred stock and has assigned its’ rights and preferences.The general purpose and effect of the amendment to our corporation's Articles is to authorize the Preferred Shares, which will enhance our Corporation's ability to finance the development and operation of our business. As of to date, we have not issued any pref erred shares.
Our principal business office is located at 6130 Elton Avenue, Suite # 338, Las Vegas, Nevada, 89107. Our administrative office for North American investor relations and U.S. regulatory reporting is located at the office of our resident agent at 245 East Liberty Street, Suite # 200, Reno, Nevada, 89501.
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Three month periods ended February 28, 2010 and 2009.
We did not generate any revenues for the three month periods ended February 28, 2010 and 2009.
Our expenses are expected to vary and we cannot determine trends in our expenditures given our lack of operating history. Our expenses for the three month period ended February 28, 2010 and 2009 are as follows.
| | 2009 | 2008 |
| Consulting fees | $ 484,500 | $ - |
| Investor relations | 15,000 | - |
| Testing expense | 13,000 | - |
| Professional fees | 11,000 | 11,113 |
| Office and miscellaneous | 872 | - |
| Transfer agent fees | 365 | - |
| |
| Total | $ 524,737 | $ 11,113 |
For the three month ended February 28, 2010, we incurred consulting fees totaling $ 484,500 of which $ 181,000 relates to our agreement with Magnum, $ 291,500 relates to our agreement with Paradigm and Alpha and the remaining balance of $ 12,000 relates to fees paid to technical staff as detailed as follows:
A total of $ 181,000 relates to our consulting agreement with Magnum as mentioned above for the period from December 1, 2009 through February 28, 2010 for accounting and corporate governance, assistance in compliance with international and domestic financing, domestic, international taxation, Federal and state securities laws, and secondary securities trading, assistance with business acquisitions and dispositions and matters of general and special law.
A total of $ 291,500 was incurred for consulting fees per our consulting agreements with Paradigm Capital Corp (“Paradigm”) and Alpha International Marketing Corp (“Alpha”). The fees for these contracts have been paid through the issuance of restricted common shares, a practice that the Company intends to continue. The expense stemming from the initial period of those contracts covering October 31, 2009 to January 31, 2010 was $ 212,000. The expense stemming from the renewal of those contracts, effective through May 31, 2010, was $ 79,500 of which $ 42,000 relates to the Paradigm Agreement and $ 37,500 relates to the Alpha Agreement.
On October 23, 2009, we entered into a consulting agreement (“Paradigm Agreement”) with Paradigm of Taiwan, for corporate and marketing consulting in Asia. Pursuant to the terms of the agreement Paradigm agreed to provide assistance on corporate structure and specific projects, including and relating to marketing, road show presentations and related matters. The agreement is effective October 23, 2009 and expires January 31, 2010 with an option at our discretion to extend the term until May 31, 2010. On January 27, 2010, the consulting agreement with Paradigm was extended to May 31, 2010.
Consideration for the services of Paradigm is $56,000 per month or a total of $168,000 for the full term until January 31, 2010. The total consideration paid to Paradigm was the issuance of 525,000 restricted common shares at a market price of $0.32 per share upon signing of the agreement. The Paradigm Agreement was extended under the same terms with consideration for services rendered until May 31, 2010 to be $ 168,000. The total consideration was paid by issuance of 5,000,000 restricted common shares at a price of $ 0.033 per share. A total of $ 42,000 was expensed during the 3 month period ended February 28, 2010.
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On October 28, 2009, we entered into a consulting agreement (“Alpha Agreement”) with Alpha of Chile, for corporate and marketing consulting in Asia, North America, South America and the Caribbean to provide assistance on corporate structure and specific projects, including and relating to marketing, road show presentations and related matters. The agreement is effective October 28, 2009 and expires January 31, 2010 with an option at our discretion to extend the term until May 31, 2010. On January 27, 2010, the consulting agreement with Alpha was extended to May 31, 2010.
Consideration for the services of Alpha is $50,000 per month or a total of $150,000 for the full term until January 31, 2010. The total consideration to Alpha was the issuance of 535,000 common shares at a market price of $0.28 per share upon signing of the agreement. The Alpha Agreement was extended under the same terms with consideration for services rendered until May 31, 2010 to b $ 150,000. The total consideration was paid by issuance of 4,545,000 restricted common shares at a price of $ 0.033 per share. A total of $ 37,500 was expensed during the 3 month period ended February 28, 2010.
We have engaged the inventor of the Acquired Technology and a supporting technical team to construct QES Systems. We have a labor contract with the inventor. The term is for a period of 5 years commencing July 1, 2009. The inventor is entitled to a monthly consulting fee in addition to a commission on sales of the QES System in China and Taiwan. As of February 28, 2010, we incurred $ 12,000 in such consulting fees.
For the three month ended February 28, 2010, we incurred $ 15,000 in investor relations fees. We currently do not have an agreement with any investor relations professionals.
We incurred $ 13,000 in testing expense relating to the Utility Unit constructed as per our Fanta Marketing Agreement with Fanta. We cannot determine at this time if additional capital is required as the Utility Unit is currently undergoing independent testing.
We incurred a total of $ 11,000 in professional fees of which $ 5,000 relates to audit and review fees, $ 1,000 relates to bookkeeping fees and the remainder of $ 5,000 relates to legal fees. Our audit and legal fees are expected to vary.
Our transfer agent fees are expected to vary. Transfer agent fees of $ 365 were incurred for the three month ended February 28, 2010.
| | Liquidity and Capital Resources |
As of February 28, 2010, we had a working capital deficit of $ 114,189. Over the next 12 months, we will require approximately $ 1,530,000 to sustain our working capital however may issue common stock to settle these liabilities. We cannot determine at this time if this method of payment will be accepted.
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| Repayment of shareholder loans | 70,000 |
| Settlement of accrued liabilities | 10,000 |
| Salaries and consulting fees | 250,000 |
| Consulting fees | 800,000 |
| Marketing | 400,000 |
| Total | $1,530,000 |
Our cash consumed by operating activities for the three month period ended February 28, 2010 was $ 17,237.
The value of the 1,060,000 shares issued for the initial period of two consulting contracts with Paradigm and Alpha was $ 318,000, of which $ 212,000 is shown in current expense. The value of the 9,545,000 shares issued for the renewal of these contracts through May 31, 2010 resulted in $ 79,500 expense for shares issued for services.
We obtained $ 198,000 in advances from our affiliate for services. The advances are due on demand.
The $ 13,000 increase in advances from customer relates to the sale of one Utility Unit to Fanta as per our Fanta Marketing Agreement. Construction of the Utility Unit commenced October 2009 and was completed in December 2009. The Utility Unit is to be used for joint marketing efforts with Fanta to market the Utility Unit to prospective buyers and joint venture partners.
The Fanta Marketing Agreement was for the purchase of one Utility Unit for $ 420,000. The company granted a $ 360,000 credit to Fanta for marketing expenses incurred for setting up distribution networks and marketing of the QES System in China. The total amount due from Fanta is $ 60,000. Payment of the $ 60,000 has been made in full.
Our cash flows from financing activities were $ 17,159 for the three month period ended February 28, 2010 of which was provided by an affiliate to fund our working capital needs. Additional capital is required in order to fund our working capital needs and we may receive additional financing through shareholder loans although we have no formal commitments from any shareholders at this time. We will not be considering taking on any long-term or short-term debt from financial institutions in the immediate future. Shareholder and affiliate loans may be granted from time to time as required to meet current working capital needs. We have no formal agreement that ensures that we will receive such loans. We may exhaust this source of funding at any time.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash. The Company does not believe that it is significantly exposed to interest rate risk, foreign currency exchange rate risk, commodity price risk, or equity price risk.
| Item 4T. CONTROLS AND PROCEDURES |
(A) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s Chief Executive Officer/Chief Accounting Officer of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of achieving the Company’s disclosure control objectives. The Company’s Chief Executive Officer/Chief Accounting Officer has concluded that the Company’s disclosure controls and procedures were not effective at this reasonable assurance level as of the period covered. In addition, the Company reviewed its internal controls, and there have been no significant changes in its internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation or from the end of the reporting period to the date of this Form 10-Q.
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(B) Changes in Internal Controls Over Financial Reporting
In connection with the evaluation of the Company’s internal controls during the Company’s 1st fiscal quarter ended February 28, 2010, the Company’s Chief Executive Officer/Chief Accounting Officer has determined that there are no changes to the Company’s internal controls over financial reporting that has materially affected, or is reasonably likely to materially effect, the Company’s internal controls over financial reporting.
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings:None.
Item 1A. Risk Factors:
A description of the risks associated with our business, financial condition, and results of operations is set forth in our annual report on Form 10-K for the year ended November 30, 2009 filed simultaneously with this Quarterly Report on Form 10-Q.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds:None
Item 3. Defaults Upon Senior Securities:None.
Item 4. Submission of Matters to a Vote of Security Holders:None
Item 5. Other Information:None.
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Item 6.
A)Exhibits
| Exhibit Number | Description |
| 3.1 | Certificate of Incorporation dated June 8, 2007(1) |
| 3.2 | Articles of Incorporation dated June 8, 2007(1) |
| 3.3 | Bylaws, effective June 7, 2008(1) |
| 10.1 | Technology Purchase Agreement dated April 30, 2009(2) |
| 10.2 | Addendum to Finders Fee Agreement dated April 30, 2009(2) |
| 10.3 | Consulting Agreement dated April 30, 2009(3) |
| 10.5 | Consulting Agreement dated June 15, 2009(4) |
| 31.1 | CEO, CAO Section 302 Certification |
| 32.1 | CEO, CAO Section 906 Certification |
| (1) | Incorporated by reference from Form S-1 filed with the SEC on March 18, 2008. |
| (2) | Incorporated by reference from Form 8K filed with the SEC on May 5, 2009 |
| (3) | Incorporated by reference from Form 8K filed with the SEC on May 20, 2009 |
| (4) | Incorporated by reference from Form 8K filed with the SEC on June 15, 2009 |
- December 9, 2009 – Item 3.02 – Unregistered Sale of Equity Securities relating to 2,650,000 commonshares issued to Magnum for settlement of debt.
- February 1, 2010 – Item 1.01 and 3.02 - Entry into a Material Definitive Agreement and UnregisteredSale of Equity Securities relating to agreement with Paradigm and Alpha for consulting services andissuance of 5,000,000 and 4,545,000 common shares, respectively.
- March 1, 2010 – Item 2.01, 5.06, 9.01, Completion of Acquisition and Disposition of Assets, Change inShell Company Status, and Financial Statements and Exhibits.
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SIGNATURES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | QUADRA PROJECTS INC. |
| Date: | April 16, 2010 | |
| | | /s/ Claude Diedrick |
| | | By: |
| | | Claude Diedrick |
| | | President, CEO, CAO, Treasurer and Director |
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