UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 2, 2004
Diatect International Corporation
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(Exact name of registrant as specified in its charter)
California 000-10147 82-0513109
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
875 Industrial Parkway, Heber City, Utah 84032
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(Address of principal executive offices) (Zip Code)
435-654-4370
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(Registrant's telephone number, including area code)
n/a
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
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On March 9, 2005, Diatect International, Inc. (the "Company") sold its
20,254 square foot office and warehouse building on 1.928 acres in Heber City,
Utah, to Morrell & Associates, LLC, for $900,000 cash. The Company is currently
negotiating a lease agreement for the property with Morrell & Associates, LLC,
and anticipates remaining in that location.
Morrell & Associates, LLC, is an affiliate of Philip Morrell, an
individual to whom the Company sold stock on March 9, 2005, (see Item 3.02
below) and with whom the Company has entered into a Memorandum of Understanding
(see Item 8.01 below). The price was determined in arm's-length negotiations
between the parties as a component of the entire agreement between the Company
and Mr. Morrell and his affiliated entities.
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ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES
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On March 9, 2005, the Company agreed to issue to Philip Morrell
1,400,000 shares of restricted common stock for an aggregate of $402,000. The
issuance of these shares was based on the exemption from registration provided
in Section 4(2) of the Securities Act of 1933. The Company provided Philip
Morrell with its recent Securities and Exchange Commission periodic reports
prior to the transaction. No general solicitation was used; Philip Morrell is an
accredited investor who negotiated the terms of the agreement directly with the
officers of the Company; and Philip Morrell acknowledged in writing that these
shares of common stock have restrictions on their transfer. The certificates to
be issued to Philip Morrell will bear a restrictive legend and stop-transfer
instructions will be placed with the Company's transfer agent. As discussed in
Item 8.01 below, the Company has agreed that these shares will not be subject to
dilution or to consolidation in the contemplated reverse split of the Company's
common stock.
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ITEM 4.02. NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL
STATEMENTS OR A RELATED AUDIT REPORT OR COMPLETED INTERIM REVIEW
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On November 5, 2004, following the Company's appointment of an interim
President and Chief Executive Officer (see Item 5.02 below), the Company filed a
report on Form 8-K announcing that it had dismissed Williams & Webster as its
principal auditor. On March 1, 2005, the Company filed a report on Form 8-K
announcing that it had engaged Hansen, Barnett & Maxwell as its principal
auditor.
On March 9, 2005, the Company's Board of Directors concluded that its
financial statements for the fiscal year ended December 31, 2003, and all
interim periods thereafter, should be placed under review and should no longer
be relied on. As an initial matter, the Board of Directors has concluded that
the Company's recording of a $12,000,000 note receivable from a related party is
likely misstated and that, on final review and evaluation, the Company will
likely record either no value or only a substantially reduced value for that
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note receivable. That conclusion has led the Company to retain an accounting
professional to assist in a comprehensive internal review of its financial
statements for the year ended December 31, 2003, and thereafter, to determine
the nature and extent of any future corrections that may be necessary. The
Company's principal executive and financial officer has discussed the matters
discussed in this Item 4.02 with the Company's newly-engaged independent
auditor, which has been engaged to audit the Company's financial statements for
the fiscal year ending December 31, 2004. The Company expects that its financial
statements for the year ended December 31, 2003, will be restated to correct the
foregoing misstatement and any other items that may be detected on review.
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ITEM 5.02. DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF
DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS
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On December 2, 2004, the Company named David H. Andrus its President,
Chief Executive Officer and Chairman. Mr. Andrus had been serving in those
positions in an interim capacity since the October 28, 2004, resignation of the
former officer holder. The Company and Mr. Andrus entered into an employment
agreement through December 31, 2006, under which Mr. Andrus is to be paid the
sum of $150,000 per year. Upon execution of the agreement, Mr. Andrus received
an incentive bonus of 3,000,000 shares of restricted common stock, 2,000,000 of
which were immediately vested and 1,000,000 of which vest subject to certain
performance benchmarks. These shares of common stock are not subject to dilution
or to consolidation in the contemplated reverse split of the Company's common
stock.
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ITEM 8.01. OTHER EVENTS
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On March 9, 2005, the Company entered into a Memorandum of
Understanding with Philip Morrell, under which the Company would acquire the
assets of The Event Source, a division of Paul Morrell, Inc., for $80,000,000.
Paul Morrell is the brother of Philip Morrell. As currently envisioned, the
Company would issue Philip Morrell a promissory note for the purchase price,
secured by the assets of The Event Source. Following the acquisition, the
Company would operate The Event Source's business in addition to its current
insecticide business.
The Event Source is a military contractor that provides life support
areas and construction projects and supplies to the United States military in
Iraq. The potential acquisition is subject to a number of conditions, including
Philip Morrell's consolidation of the ownership interest in The Event Source's
assets, the preparation of audited financial statements for The Event Source's
assets, satisfactory due diligence by both Philip Morrell and the Company, the
negotiation of definitive agreements, the satisfaction of various conditions
precedent to close, compliance with representation and warranties, the approval
of legal and accounting matters, and other conditions.
Prior to completing the acquisition, the stockholders will be required
to approve a change of domicile of the Company from California and a
recapitalization of the Company in which the approximate 92,000,000 shares of
issued and outstanding common stock will be reverse split 6-to-1, without any
consolidation of approximately 7,400,000 additional shares outstanding that by
contrast are not subject to consolidation, while retaining the current
authorized capitalization of 100,000,000 shares of common stock. The shares not
subject to consolidation include the 1,400,000 shares the Company agreed to
issue to Philip Morrell on March 9, 2005, approximately 3,000,000 shares held by
David H. Andrus, the Company's Chief Executive Officer, and approximately
3,000,000 shares held by Catalyst Business Development, LLC. The Company
anticipates that it will also change its corporate name to reflect the
post-acquisition principal activities.
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ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
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The following are filed as exhibits to this report:
Exhibit
Number Title of Document Location
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Item 10 Material Contracts
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10.01 Real Property Purchase Agreement between Diatect This filing
International Corporation and the Morrell &
Associates, LLC, dated March 9, 2005
10.02 Subscription Agreement This filing
10.03 Employment Agreement of David H. Andrus dated This filing
December 2, 2004
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DIATECT INTERNATIONAL CORPORATION
Date: March 15, 2005 By /s/ David H. Andrus
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David H. Andrus
Its Chief Executive Officer
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