Advanced ChemTech, Inc and Advanced SynTech LLC Situation_Analysis... · Sales Prospectus PREFACE...
Transcript of Advanced ChemTech, Inc and Advanced SynTech LLC Situation_Analysis... · Sales Prospectus PREFACE...
Advanced ChemTech, Inc and
Advanced SynTech LLC
Sales Prospectus December 2004
Prepared by
LS Associates, LLC
Copy # __________
Sales Prospectus Table of Contents
PREFACE
I. EXECUTIVE SUMMARY 4
II. THE COMPANIES 9 OVERVIEW 9 PRODUCTS 13 FACILITIES 17 MANAGEMENT / EMPLOYEES 18
III. CUSTOMERS AND THE MARKETPLACE 23
SALES FORCE AND DISTRIBUTORS MARKETING
IV. SELECTED FINANCIAL INFORMATION
HISTORICAL FINANCIALS 25
V. EXHIBITS 26
1. MONTHLY SALES BY DIVISION – OCT 2003-OCT 2004 2. SAMPLE LISTING OF ACT INSTRUMENT CUSTOMERS BY CATEGORY 3.CHANGES TO CHEMICAL DIVISION AND RELATED INVENTORY IN 2004 4. LIST OF INTELLECTUAL PROPERTY FILED WITH FEDERAL AND FOREIGN AUTHORITIES 5. DESCRIPTION OF BENEFITS AND EMPLOYEE BENEFIT PLANS 6. DESCRIPTION OF LIABILITIES TO BE ASSUMED 7. LIST OF AVAILABLE ENVIRONMENTAL REPORTS 8. OCTOBER 2004 MONTHLY OPERATING REPORT FILED BY TRUSTEE
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Sales Prospectus
PREFACE
This prospectus and its contents have been prepared by LS Associates LLC (“LS”) with the assistance of Advanced ChemTech, Inc. ( “ACT” ), Advanced SynTech LLC (“AST” and collectively with ACT, the “ Companies”) and their respective affiliates. The material contained herein is based on information obtained from the Companies’ management. LS has sought to use reasonable care in compiling this prospectus on behalf of the Companies. The information contained in this prospectus is qualified in its entirety by, and should be read in conjunction with, the more detailed information including the notes thereto, appearing elsewhere in the prospectus.
LS and Robert W. Leasure, as the Companies’ Chapter 11 Trustee (the “Trustee”), recommend that any prospective bidder make an independent investigation of the assets and obligations of ACT and AST and their respective businesses. All requests for access to additional due diligence materials or to schedule a due diligence trip to the Companies’ premises should be directed to John Albert at Focus Management Group, 310-925-1957, [email protected] (“Focus Management”).
None of LS, the Trustee, the Companies or Focus Management (collectively, the “Disclosing Parties”) is making any representation or warranty, express or implied, as to the accuracy or completeness of any of the information contained in this prospectus or any other information provided to you by, or on behalf of, any of the Disclosing Parties. Any representations and warranties by the Disclosing Parties shall be limited to those representations and warranties, if any, made to the applicable buyer in the definitive acquisition agreement between such buyer and any of the Disclosing Parties if, when and as executed and subject to such limitations and restrictions as may be specified therein, which has been approved by the Bankruptcy Court pursuant to appropriate procedures (the “Definitive Agreement”). Neither the Disclosing Parties nor any of their respective affiliates, officers, directors, managers, employees, representatives, attorneys or agents shall have any liability to you or any other person (including, without limitation, any of your representatives) resulting from your use or reliance upon any of the information contained on this prospectus or otherwise provided to you by, or on behalf of, any of the Disclosing Parties, other than any express warranties that may be included in the Definitive Agreement.
This prospectus is provided only for the information of the persons and institutions to which it is directed on a confidential basis and is subject to the Confidentiality Agreement signed by the recipient hereof. LS Associates, LLC
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Sales Prospectus I. EXECUTIVE SUMMARY Advanced ChemTech, Inc. (“ACT”) is a Kentucky corporation formed in 1985. Currently, ACT is a manufacturer and distributor of instrumentation and fine chemicals utilized in the pharmaceutical and biotech industries. Advanced SynTech LLC, a Kentucky limited liability company, (“AST”), is an affiliated company to ACT, which shares substantially the same shareholders. AST was formed in 1999 to accelerate the discovery of new medicines through innovative techniques in combinatorial chemistry and core technology utilizing proprietary high throughput robotic compound synthesis and bioassay screening. ACT and AST (collectively the “Companies”) are currently the Debtors in a Chapter 11 proceeding in the United States Bankruptcy Court for the Western District of Kentucky. On or about December 1, 2003, Robert W. Leasure, Jr. of LS Associates, LLC was appointed Chapter 11 trustee (the “Trustee”) for the bankruptcy estates of each of the Companies. The case numbers for the Companies’ Chapter 11 cases are 03-31381 for ACT and 03-31382 for AST, respectively. On September 22, 2004, the Bankruptcy Court issued an order substantively consolidating the Companies’ bankruptcy cases, and provisions for joint administration under case number 03-31381. The assets of the Companies are currently for sale through a proposed 363 sale process. The calendar of events for the sale process is as follows:
Due Diligence Start Date December 7,2004 Due Diligence Close Date January 21, 2005 Bid Deadline: January 28, 2005, 5:00pm E.S.T. Sealed Bid Auction: February 3, 2005, 9:00am E.S.T. Hearing to Approve Sale February 8, 2005, 9:00am E.S.T. Sale Close: No later than approx. February 18,2005
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Sales Prospectus Currently, ACT has two primary lines of business: Chemical Division - manufactures and distributes chemical products utilized in the synthesis of peptides by both solid phase and solution phase methodologies. Instrument Division - manufactures and services instrumentation for the automated synthesis of peptides and small organic molecules. ACT has eight instrument models that it currently produces – two models began shipping in 2004 and an additional model is in development and scheduled to be introduced in 2005. ACT’s products and services are provided to a worldwide customer base and its customers range from medical facilities and universities to pharmaceutical and biotech companies. The primary offices and assets of the Companies and all of ACT’s production facilities are located in Louisville, Kentucky. AST has ceased active business operations. Among AST’s assets are patents, intellectual property and an inventory of libraries that it compiled and used for drug and research development. These assets of AST are included in the proposed sale. ACT has been operationally restructured since filing bankruptcy. Over the last twelve months, ACT’s sales and expenses have stabilized and ACT has generated cash flow to cover its direct operating expenses. In addition to ACT’s operational restructuring, ACT has undertaken extensive maintenance and clean-up at its facilities and focused on customer relationships, which has begun to return ACT to its prior stature as a first class chemistry and instrumentation design and manufacturing operation. A major component of ACT’s restructuring efforts has been to concentrate on increasing operating profits by focusing on sales of higher profit products and discontinuing unprofitable lines of business.
ACT Operating Profits Unaudited
(000’s omitted) Average
2002 &
2003 2004 Sales $8,613 $5,770 Net Income from Operations ($1,120) $935 % -13.0% 16.2%
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ACT – Sales Prospectus In addition to focusing on operating profits, ACT has aggressively pursued rebuilding its customer data base by improving lead times, product quality, and service and instrument reliability. ACT has new products in development and testing, which ACT hopes to introduce into the market during its 2005 fiscal year. ACT has also adjusted its pricing to remain competitive in the global market. ACT’s management has worked to positively reposition ACT in the overseas market and regain the confidence of its overseas distributors. These actions include:
o attending recent international conferences and trade shows; o engaging new distributors in both China and Europe; and o addressing old issues impacting its distributor relationships in both
India and Japan.
Revenues Historically, ACT’s accounting records have been kept on a fiscal year ending September 30th. ACT’s historical revenues broken down by division are as follows:
ACT HISTORICAL REVENUES
UNAUDTIED 000’S OMITTED 12 MONTHS ENDING 09/30
INSTRUMENTS
CHEMICALS, PEPTIDES, LIBRARIES
SERVICE CONTRACTS
PARTS
OTHER
TOTAL
2002 4,044 3,557 296 978 72 8,947 2003 3,680 3,723 121 641 113 8,278 2004 2,313 2,955 113 327 62 5,770
ACT’s records indicate that during 2004 the company sold products to over 589 accounts. Excluding direct sales to European distributorships, no single account exceeded 6% of ACT’s total sales for the 12 month period ended 09/30/04.
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Sales Prospectus A major factor in ACT’s recent sales has been the change in sales focus to sell higher profit products and discontinue unprofitable lines of business. ACT’s Chapter 11 filing appears to have had an adverse impact on customer confidence which has been most evident in overseas sales, particularly from Europe and Japan.
ACT HISTORICAL REVENUES ADJUSTED FOR SALES TO EUROPE & JAPAN
fiscal year ended ( 000’s omitted) 2002 2003 2004 Total Annual Revenues $8,947 $8,278 $5,770Less Estimated Sales to : Europe 1,797 1,239 547 Japan 149 607 163 Annual Revenues Adjusted for Sales to Europe & Japan $7,001 $6,432 $5,060
Over the last ten months, ACT’s management has initiated the following changes and actions to address its soft sales and to restore customer confidence in the overseas markets : - February 2004 - Attended the Pittcon conference, where ACT met with distributors attending the conference and addressed their concerns. - June 2004 - Engaged a new distributor in China. - July 2004 - Addressed old issues impacting distributor its Indian distributor and as a result this distributor has re- engaged in selling for ACT. - September 2004 - Attended the European Peptide Symposium in Prague. - October 2004 - Addressed issues impacting its Japanese distributor and exchanged visits. Due to those actions, the Japanese distributor appears to have renewed confidence and is reengaged in selling for ACT. - Drafted and signed a new distributor agreement with Activotec, located in the U.K., to sell to the European market . LS Associates, LLC
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ACT – Sales Prospectus - November 2004 - ACT attended Japan peptide show as well as conducted visits with several of its existing customers. - Attended American Association of Pharmaceutical Science show in Baltimore. Along with addressing the overseas distributor issues, the management at ACT has taken the following actions over the last twelve months in order to rebuild customer confidence :
a. replaced three of the four sales people in the United States; b. rebuilt the service department; c. empowered associates to sell and actively support service contracts; d. aggressively pursued rebuilding the customer data base; e. improved lead times, quality and delivery; f. updated and modernized pricing of items in catalogues; g. improved the reliability of instruments; h. adopted a new sales incentive program; and i. sent out new upgraded software to customers with installed ACT instruments
in order to address prior software bugs. These actions have resulted in improving levels of new orders. ACT’s management believes that its business now has a foundation for growth and profitability , which will be further enhanced upon removing the cloud of bankruptcy. Over the last four months, ACT has seen its backlog increase significantly.
ACT Orders - Last Four Months ( 000's omitted)
Net Ending Orders Backlog 2004 August 256 264 September 320 319 October 640 523 November 327 650 December - MTD @ 12/03/04 150 782
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ACT – Sales Prospectus II. THE COMPANIES OVERVIEW Founded in 1985, ACT’s initial mission was to be the world leader in the pharmaceutical biotechnology marketplace by profitably developing, manufacturing and delivering unique state of the art products of unsurpassed quality. In ACT’s early years, combinatorial chemistry methods were proving to be a major breakthrough for pharmaceutical research, resulting in both dramatically increased productivity and high levels of cost reduction. Historically, drug development was a product of trial and error, guided as much by the instincts and classical training of chemists, biologists and physicians as by any rational linear process. The introduction of new technologies for combinatorial chemistry and high-throughput screening during the 1980’s had two major consequences in drug development:
a. those new technologies began to define a rational and systematic process for selecting drug targets and drug candidates; and
b. they began to generate quantities of data that were far beyond the powers of manual analysis.
ACT had anticipated the value of these new technologies before many of its competitors and introduced its first organic synthesizer to the pharmaceutical research market in 1995. A fundamental principle of ACT’s competitive strategy in the late 1990’s was to retain control of all the critical operations related to its technology. As a result, ACT had the internal capabilities required to develop products from initial concept through commercial scale production without reliance on outside sources. This capability was developed to allow ACT to respond to changes in the market without hesitation. In May 1996, Helios Pharmaceuticals, Inc. (“Helios”) was formed as a high growth potential company to accelerate the discovery of new medicines through innovative techniques in combinatorial chemistry and core technologies in proprietary high throughput robotic compound synthesis and bioassay screening. According to ACT’s internal documents, it was estimated that from 1996 – 1999, ACT funded the development of Helios with over $8M from ACT’s operating cash flow. Later, Helios sold substantially all of its assets to the newly formed AST. LS Associates, LLC
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Sales Prospectus AST is an affiliate of ACT, which shares substantially the same shareholders/members. AST operated in a separate office building /operating facility (approximately 70,000 square foot) and utilized a research farm. AST’s active business operations concluded prior to its bankruptcy filing in March 2003. Both AST’s office building and farm have been closed and sold with the proceeds of such sale being used to repay AST’s senior secured debt holder. Neither AST’s office building nor the farm has been a part of the Companies’ bankruptcy estates. Following the close of AST’s operations, its remaining employees and assets were relocated to ACT’s current premises. AST has no remaining active business operations. Its equipment leases have been terminated. AST’s remaining assets include its library inventory, related documented process knowledge and patents, which the Trustee shall sell with the Companies’ other assets. FACTORS IN INSOLVENCY In addition to funding the losses at Helios and AST, ACT had developed an extensive line of chemicals that it produced and had available for sale in inventory. As of the end of 2003, ACT’s inventory had an estimated sales value in excess of $ 14M. However, that inventory did not represent recurring sales need nor did the inventory have an immediate market. It appears that ACT’s investment in excess and obsolete inventory along with its research, development and investment at Helios/AST depleted significant cash resources, increased ACT’s debt and created P&L losses for ACT. In 2003, the Companies faced an inability to adequately service and repay their debts which totaled approximately $11M. The Companies filed for bankruptcy under Chapter 11 on March 3,2003. LS Associates, LLC
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Sales Prospectus ACT – POST FILING On or about December 1, 2003, the Trustee was appointed as Chapter 11 trustee for the Companies. At that time, Dr. Hossain Saneii, the Companies’ Founder and CEO, left the Companies. Additionally, the former CFO of the Companies had resigned in October 2003. Since his appointment, the Trustee has evaluated the business and made changes necessary to restore ACT to profitability. Quarterly results of ACT’s operations since the quarter prior to the appointment of the Trustee are summarized below:
ACT FINANCIAL PERFORMANCE Quarterly Increments
UNAUDITED (000’s eliminated)
Q3 2003
July- Sept 03*
Q4 2003
Oct- Dec 03
Q1 2004
Jan- Mar 04
Q2 2004 April-
June 04
Q3 2004
July - Sept 04
Revenue $1,745 $1,139 $2,149 $1,406 $1,077 Gross Profit (2,674) 339 1,054 629 391 Operating Expenses 412 429 423 335 291 EBITDA( before extraordinary items) (3,032) (45) 677 340 139
* Sept 03 had numerous adjustments including reserving for related company investments and receivables, adjustments to reconcile secured debt, and prior period accounting adjustments.
In addition to restoring ACT’s operating profitability and addressing customer confidence as previously outlined, ACT’s management has initiated several other actions to improve ACT’s business environment.
ACCOUNTING/RECORD KEEPING
• Prepared timely and accurate financial statements to the best knowledge of the Trustee and ACT’s employees.
• Initiated record retention policy and organized and filed accounting records previously in disarray.
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Sales Prospectus OBSOLETE EQUPIMENT /INVENTORIES
• Identified the chemicals and instruments inventory to sell as excess or obsolete. • Identified excess or obsolete equipment to sell, and held auctions to sell same.
Details of those sales are available upon request. OPERATIONS Overall
• Completed needed service, upgrades, and equipment purchases required for employees to perform their duties and to protect the Companies’ assets.
• Began to consolidate and streamline facilities and operations. • Initiated efforts to clean and revitalize the facilities.
Chemical Division
• Prioritized chemists workload to focus first on those peptides and chemicals that ACT is currently able to produce versus peptide research and development efforts.
• Improved peptide quoting and on time delivery. • Brought in outside resources to evaluate and complete chemical clean-up,
regulatory compliance and related training. Instrument Division
• Wrote training manuals for existing and new instruments. • Rebuilt customer service and tech support departments and increased the focus on
supporting warranty and maintenance agreements for instrument sales. • Focused instrument R&D effort to develop and test new instruments, software and
related applications for introduction in 2005. • Improved the quality of the instrument software for existing instruments. • Improved testing and quality procedures prior to shipping.
HUMAN RESOURCES
• Restored salary cuts as well as lost vacation and personal days. • Consolidated or eliminated positions that were unnecessary. • Empowered the managers of each division to make their own decisions and
supervise their own employees. • Created new organizational charts to more clearly define responsibilities and
reporting. • Cleaned up open and outstanding 401(K) issues. • Negotiated new annual benefits package.
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Sales Prospectus ACT “TODAY” Currently, ACT manufactures and markets a comprehensive and diverse variety of unique instruments, and chemical and resin products used by researchers in the pharmaceutical and research laboratory for the synthesis of combinatorial libraries, organic compounds and peptides. ACT markets approximately 1,500 chemical and resin products. ACT manufactures peptide and organic synthesizers to meet the specific needs of the Combinatorial Chemistry marketplace. ACT’s service and tech support group has recently added resources and has become increasingly customer driven. There are new instrument product introductions planned for 2005, some of which are in testing and others are in development. PRODUCTS Chemical Division The product line for ACT’s Chemical Division includes high quality resins, unusual amino acids, derivatised amino acids and chiral compounds. Currently, the chemical division produces and sells primarily 3 types of products:
• Amino Acids – Since its inception, ACT has manufactured specialty amino acid derivatives and novel Chiral building blocks. Due to their availability , multi-functionality, structural diversity and versatility, amino acids are among the most important tools for drug discovery, combinatorial chemistry and stereoselective synthesis.
• Synthesis Resins – ACT manufactures resins for peptides and
combinatorial synthesis. ACT supplies these resins in gram to kilo quantities in various substitution levels, mesh sizes and cross linking agents. The company also provides supply base resins, synthesis resins and pre-loaded resins and continues to add new products.
• Custom Peptide Synthesis – ACT offers flexible and economic peptide
synthesis services, including the use of uncommon and modified amino acids. ACT can produce peptides in the customer’s choice of configurations, modifications and purity.
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Sales Prospectus
ACT Current Chemical Division Primary Product Classes
Product Class
1 High Value AA(s)
2 Custom Peptides
3 High Value Reagents
4 Resin (High Value)
Instrument Division ACT has represented itself as a pioneer in the development of synthesizers capable of performing multiple parallel syntheses. According to customer feedback, ACT’s instruments are flexible and easy to operate. The speed of their synthesis is a strong selling point to the pharmaceutical industry. As of May, 2004, all of ACT’s automatic synthesizers are run with integrated, wireless input devices based on a Microsoft Windows compatible software package. The current instrumentation product line is composed of the following instruments: Peptide Synthesizers ACT’s instruments were some of the first automated multiple peptide synthesizers on the market. The early instruments focused primarily on the automation of tasks that the chemist would otherwise perform manually. This instrument line has evolved in response to changing market demand, and today represents the very latest in high throughput, robotically assisted synthesis automation. ACT currently produces peptide synthesizers from single-small scale synthesis to pharmaceutical grade bulk synthesis. Current models of peptide synthesizers available at ACT are:
• Model 90 – An automated small to midscale peptide synthesizer capable of synthesizing two peptides in parallel utilizing solid supports
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Sales Prospectus
• Model Apex – This is an enhanced version of the old Model 396, which has dual robotic arm speed for flexibility. This instrument can produce up to 96 molecules at the same time or is flexible enough to produce as few as 8 molecules at the gram scale.
• Model 400 – This instrument was designed for production of
pharmaceutical grade peptides on solid supports. The Model 400 meets CGMP production requirements and is manufactured to order depending on the specific process the user intends to employ.
• Apogee – An automated small scale peptide synthesizer capable of
synthesizing fast, long peptides. Utilizes up to 36 pre-fixed bar coded amino acid bottles. Also uses ACT’s new valve technology.
• Velocity – Extremely fast T-BOC peptide synthesizer – still under
development for introduction in 2005. Organic Synthesizers Models include:
• Vantage – This instrument is modeled after the first fully automated organic synthesizer developed in the world in 1995. It is a highly flexible instrument with dual robotic arms that can synthesize up to 96 different compounds in a temperature-controlled environment.
• Model 357 – This instrument has the capability to produce up to
36 mixtures simultaneously. This instrument was the first available for the split and combine of mixture synthesis. The instrument runs on DOS software.
• Model 384 – This instrument has many of the same features as the
Model 496 and was designed to produce 384 compounds at the same time. A unique feature of this instrument is that four 96 well reaction blocks can each run separately at different temperatures and reaction conditions.
• Solution – Solution phase organic synthesizer that contains
reaction vessels in 16 discrete temperature zones. This instrument is also capable of running solid phase chemistry.
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Sales Prospectus
ACT Instrument Products ANALYSIS
Model Year Product
Estimated Inventory
as of 11/30/04
Approximate # Sold in last
3 years
Estimated Average
Range of New Unit Selling
Price**
1994 Model 357
0 2
$110,000-$140,000
1996 Model 400
.5 3
$150,000-$250,000
1996 Model 384
0 5
$200,000-$350,000
1997 Model 90
3.5
42
$27,000-$32,500
1999 Vantage
0 5
$120,000-$155,000
2001 APEX (4 Models)
7
82
$60,000-$110,000
2001 LabMate ( discontinued*)
34
33
$8,000
# Sold in last 9
months
2003 Solution
1.5 2
$150,000-$200,000
2003 Apogee
4 3
$50,000-$65,000
New 2005 Velocity
2
N/A
TBD * 4 Labmates sold in last 12 months ** Unit prices vary depending on model configuration. ACT’s management believes that the base strength of its instrument division is the range of ACT’s offerings that include economical, single and dual synthesizer systems. SERVICE CONTRACTS ACT provides warranties for new instruments for one year from date of installation. Valves are under warranty for 90 days. The warranty includes a ten month preventive maintenance check-up in the tenth month. Service contracts and extended warranties may be offered on an annual basis for 5 years at a cost of approximately 10% of the list price of the instrument, increasing each year as the instrument ages. LS Associates, LLC
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Sales Prospectus FACILITIES ACT’s headquarters are located in Louisville, Kentucky and are currently on more than seven acres of land. It is compromised of two adjacent buildings which total 75,000 square feet. The two properties that house ACT’s operations are 5501 and 5609 Fern Valley Road ( 5609 Fern Valley Road is included among the Companies’ assets for sale). Below is a listing of the ACT’s current properties.
Property Business Purpose
Ownership Approximate Square Feet
Estimated Space Being
Used in Current
Operation 5501 Fern Valley Rd Instrument
Division Bank One
(short-term lease to ACT)
40,000 10,000
5609 Fern Valley Rd Chemical Division
ACT 35,000 25,000
6309 Old Shepherdsville Rd None ACT Land only – currently for
sale
Not currently used in the
Companies’ operations
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Sales Prospectus MANAGEMENT AND EMPLOYEES Below is the current organizational chart for ACT.
110104
ADVANCED CHEMTECHORGANIZATIONAL CHARTS
A/R, A/P, Payroll, MIS
Human Resources, Security
Maintenance& Janitorial
Shipping & Receiving
Joe KrollCFO
Administrative and Bldg.Services
Chemical Production
Chemical Inventory
Peptide Production
Compliance
Chemical Purchasing, Travel
Quality Control
Tom HopkinsChemical Production Mgr.Chemical Sales & Quotes
Technical Sales
Customer Service
Craig KalmerDomestic Instrument Sales
Peter DakinInternational Instrument Sales
Instrument Assembly
Instrument Purchasing &Inventory
Machine Shop
Mike FerriellInstrument Assembly
Manager
Software Engineering
Engineering
Technical Support
Mahendra MenakuruEngineering Manager
Field Service andApplications
Maintenance Agreementsand Warranties
James KirkInstrument Customer
Support
Robert LeasureTrustee/Accting CEO
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Sales Prospectus Since the appointment of the Trustee, ACT’s management has increased the company’s focus on core profitable product lines as well as utilization of a more focused and streamlined manufacturing approach in order to restore profitability at ACT. As a result, several positions were eliminated. However average annual sales by employee increased approximately 30%. ACT HEADCOUNT ANALYSIS
September 30,2002 September 30,2003 November 1, 2004
Full Time
Part Time
Total
Full Time
Part Time
Total
Full Time
Part Time
Total
Administrative , Accting , HR
11 1 12 7 1 8 3 0 3
Chemical Production 26 0 26 22 0 22 14 1 15 Engineering-Instruments 8 1 9 6 0 6 4 0 4 Instrument Production, Service, Application testing and Administrative
19 1 20 13 2 15 7 1 8
Maintenance 4 0 4 5 0 5 3 1 4 Sales 14 0 14 9 0 9 8 0 8 Total 82 3 85 62 3 65 39 3 42 Annual Sales (000’s omitted) 2002 8,947 2003 8,278 2004 5,770 Estimated Annual Sales per Employee (000’s omitted)
105 127 137
Set forth below is a list of the Companies’ current management. The Companies can not warrant that any of the Companies’ management or employees will remain employed with the Companies in the future. Upon its selection as the successful bidder, the applicable Buyer must establish the terms and conditions of its employment with any or all of the Companies’ management and employees it wishes to retain. MANAGEMENT BIOS Dr. Thomas E. Hopkins- Chemical Production Manager Dr. Hopkins has twenty years of industrial experience in process development and improvement in the pharmaceutical and biotech industries. Prior to joining ACT, Dr. Hopkins worked for Eli-Lilly and Co. in Clinton Indiana and earlier for Morton-Thiokol in Woodstock, Illinois.
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Sales Prospectus Dr. Hopkins joined ACT in January of 1998 as Pilot Plant Manager. His extensive knowledge of converting laboratory processes into commercial scale manufactured products were key to the development and success of ACT entering into the large scale resin and amino acid chemical market place. Dr. Hopkins was promoted to the position of Chemical Productions Manager in November of 2003. He directs all chemical production activities at ACT which include amino acids, resins, peptides, chemical purchasing and quality control. Craig Kalmer- National Sales Manager Craig has seven years sales experience in the biotech and pharmaceutical industries. Prior to joining ACT, Craig worked as a pharmaceutical sales representative for Eli-Rutledge, Inc. in Cincinnati, Ohio. Craig joined ACT in October of 1999 as an inside chemical sales representative covering the Eastern United States territories. While in this position Craig was able to increase catalog sales and secure key contracts with large pharmaceutical companies and government institutions. Craig was promoted to the position of Technical Sales Representative in February of 2001. In that position, he was responsible for the sale of ACT instrumentation and chemicals in the Southeastern territory. In response to his high sales numbers, contract and marketing efforts, Craig was again promoted in March of 2002 to the position of Eastern U.S. Sales Manager. In February 2003, Craig was again recognized for his contribution to ACT and was promoted to his current position of National Sales Manager. Craig is directly responsible for the Domestic Sales and Marketing Department as well as the Asian Market. Mahendra Menakuru- R & D Engineering Manager and Applications Manager Mahendra joined ACT in June of 1996 as an Instrument Production Engineer. While in that position, Mahendra was involved in development, documentation and implementation of ACT’s production standards and procedures to build organic and peptide synthesizers using dual arm robots. This included the development and maintenance of electrical schematics and production assembly manuals for the entire product range. He was instrumental in modifying ACTs’ instrument product range to comply with industry standards as part of a team of three engineers. Mahendra designed the Fast Wash System that is considered as a key and value- added improvement in ACT’s range of Peptide and Organic Synthesizers. Due to his outstanding efforts and product knowledge Mahendra was promoted to the Research and Development Engineering Department in 1999. LS Associates, LLC
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Sales Prospectus Based on his direct development and improvements of ACT instrumentation, he was again recognized and promoted to Engineering Design Team Leader in December of 2000. Mahendra was directly responsible for design of new instrumentation and accessories. In February of 2004, Mahendra was promoted by the Trustee to his current position of Engineering Manager. He is directly responsible for all of engineering this includes software design, instrument development and enhancements, new product testing and product quality control. He has also taken on the role of Chemical Applications Manager and overseas a team of two application chemists. Mahendra is the engineer that was primarily responsible for developing two new product models, the Solution and the Velocity, which should be ready for product introduction in 2005. Mike Ferriell- Fabrications Manager Mike has thirty-five years of experience in the manufacturing arena. The past twenty years centered on the design and development of automated biotechnology instrumentation involving robotics, fluid transfer, thermodynamics, custom-machined components and production tooling. While owning his own tool & die company, Mike worked with ACT’s engineering team for ten years on key instrumentation designs before joining the company in March of 1995 as Fabrications Manager. While managing all machining operations, Mike was deeply involved in instrumentation design and development. The current product line involves patents resulting from his efforts. This includes the current line of Apex (396) instrumentation and the “reaction-block” technology (ref US Pat No 5,746,982), and the “ARES” series of pressurized reaction blocks (ref US Pat No 6,358,479). Mike joined the engineering group full time in 2001 as Senior Design Engineer. In October 2004, Mike assumed the additional responsibilities as Instrument Production Manager. He is directly responsible for all instrument production including production methods, part design modifications, the development and testing of instruments, software and new products. LS Associates, LLC
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Sales Prospectus ADMINISTRATIVE/ACCOUNTING Joe Kroll has been ACT’s acting interim Chief Financial Officer since the appointment of the Trustee. He has a background in treasury management, cost accounting, financial planning as well as international accounting. Terri Bell, CPA and Susan Myres are consultants hired by LS Associates, LLC, the consulting firm employed by the Trustee. They are performing accounting and bookkeeping duties as the interim controller and accounting clerk accordingly. ACT’s current accounting system is MAS90. LS Associates, LLC
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Sales Prospectus III. CUSTOMERS AND THE MARKETPLACE
SALES FORCE AND DISTRIBUTORS ACT has sold and distributed its products for drug discovery development and technical services for nearly twenty years. Currently ACT employs eight full-time sales associates. ACT’s management has continued to evaluate and revamp its sales force. Recent changes include new distributors in Mainland China and Europe.
The United States sales personnel are divided into four territories: Northeast, Southeast, Central and West. This has allowed the sales force to keep strategic alliances with key customers in each target market. Currently the ACT sales person in a territory sells both instruments and chemicals. For specific technical needs, the sales force can enlist assistance from ACT’s engineers and chemists. All technical sales representatives in the United States, now work from ACT’s Louisville , Kentucky facility. ACT’s sales force works with a base pay and commission program. They provide their own cell phone and laptops to be used during business travel and presentations and are reimbursed via a monthly allowance. MARKETING
ACT maintains extensive local databases of current and potential customers that are utilized for targeted mailings of catalogues and other publications.
ACT’S marketing strategies have historically been to :
1. focus on the uniqueness of the company’s products; 2. promote the technological advances and the excellent value its
products offer to its customers; and 3. leverage its brand recognition as new products are introduced into
the market. In general, ACT has used the following approaches to promote its products: TRADITIONAL
• Tradeshows – larger general scientific meetings and specialized conferences.
• Catalogues – lists products and services separating various categories of items to better serve the markets in which the company participates.
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Sales Prospectus
• Print Advertising – in professional journals , news publications and relevant trade publication
• Direct Mail and E-mail – of focused product literature • Website – www.peptide.com • Field Sales and Telesales
TECHNICAL
• Seminars – focusing on products and their applications • Newsletters – advances for new products and technical information;
techniques for ACT instrument users • User Groups – establishment of regular user groups in appropriate
regions • Reference Publications – from internal and external scientists
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Sales Prospectus IV. SELECTED FINANCIAL INFORMATION
HISTORICAL FINANCIALS
ACT’s fiscal year end is September 30th. Based on a review of ACT’s general ledgers, its annual unaudited financial results appear as follows:
UNAUDITED YEAR ENDED SEPTEMBER 30 000’s omitted 2001 2002 2003 2004 Revenue 12,061 8,947 8,278 5,770 Cost of Good Sold (4,687) (2,860) (7,264) (3,358) Gross Profit 7,374 7,184 1,028 2,413 61% 72% 12% 42% Operating Expenses (5,763) (6,752) (3,699) (1,478) Net Income from Operations 1,610 432 (2,671) 935 14% 5% (33%) 17% Other Income(Expense) (1,276) (898) *(11,462) 1,864 Net Income 334 (466) (14,133) 2,789
*In September 2003, prior to the appointment of the Trustee, there were significant accounting adjustments made to other income and expense – an outline of the bulk of the adjustments is below:
000’s omitted Adjustments to agree to Debt Reconciliations $2,571 Discontinued or Uncertain Operations Write-off Investment in AST 5,570 Reserve Intercompany Receivable Balance 2,304 Reserve Investment in ACTE 444 $ 8,318 $10,889
In addition, it appears that inventory was adjusted down by an entry of approximately $3.2M in September 2003. LS Associates, LLC
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Sales Prospectus V. EXHIBITS
1. ACT Monthly Sales by Division October 2003-October 2004 Unaudited Chemicals Peptides Instruments Parts Service Other Total
Oct-03
166,517
10,972
176,479
36,801
-
20,474
411,243
Nov-03
204,131
40,341
16,946
19,721
-
957
282,096
Dec-03
151,209
94,967
141,216
26,257
6,324
25,412
445,385
Jan-04
272,918
22,846
366,877
94,214
-
12,596
769,451
Feb-04
197,582
51,700
432,960
23,462
-
22,071
727,775
Mar-04
281,052
27,462
268,582
31,496
14,541
28,456
651,589
Apr-04
206,501
8,745
70,263
20,128
32,899
1,250
339,786
May-04
229,407
67,629
362,464
12,472
17,470
5,080
694,522
Jun-04
188,038
47,536
101,617
23,725
7,937
2,804
371,657
Jul-04
278,860
12,632
115,776
6,731
5,749
20,154
439,902
Aug-04
174,499
7,510
140,281
15,764
19,796
3,169
361,019
Sep-04
103,630
22,607
119,260
16,495
8,726
5,217
275,935
Oct-04
199,024
8,807
177,176
32,613
8,999
1,834
428,453
2,653,368 423,754 2,489,897 359,879 122,441 149,474
6,198,813
LS Associates, LLC
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Exhibit 2. Sample Listing of ACT Instrument Customers
Advanced ChemTechSample Page Effective 11-1-2004
Example list of Advanced ChemTech Synthesizer Customers by catagories
AGRI-SCIENCE PHARMACEUTICAL PHARMACEUTICAL EDUCATIONDow Agro Science Abbott Laboratories Multiple ACT Synthesizers Albany College of PharmacyRW Johnson / Ortho-McNeil Agouron Pharmaceuticals Inc. 3 Dimensional Pharmaceuticals Albert Einstein College of
Alanex AAI (Applied Analytical AlleghenyUniversityCOMMERCIAL American Cyanamid AnaSpec Inc. Boston University
Multiple ACT Synthesizers Amgen, Inc. Ariad Pharmaceuticals Case Western Reserve UniversityCoca-Cola Company Amylin Pharmaceuticals, Inc. Biogen Colorado, Univ. ofDow Chemical Company Antivirals Inc. Biomeasure Creighton UniversityDupont Company Axys Pharma Bio-Mega / BICL Emory UniversityProctor & Gamble Bayer Corp. Boehringer Ingelheim Howard Hughes Medical Inst. -
Bio-Synthesis Bristol-Myers Squibb Illinios/Chicago, University ofHOSPITALS Cadus Pharmaceutical Corporation Centeon (formerly Armour Iowa State University
Cleveland Clinic Foundation Centocor Inc. Eli Lilly & Company John Hopkins UniversityMassachusetts General Hospital Chiron Corporation Glaxo Wellcome Kentucky, University ofMayo Foundation Cognetix Inc. Hoffmann-La Roche, Inc Louisiana State UniversityNew York Blood Center Commonwealth Biotechnologies Magainin Pharmaceuticals, Inc. Marquette School of Dentistry
Cytel Corporation Merck & Co Memphis, University ofLABORATORIES DNAX Molecumetics Miami, University of
A&A Labs Epimune (formally Cytel Nycomed TARC Michigan, University ofAdherex Technologies Inc. Epix Medical Roche (Syntex Chemicals, Inc.) Mississippi State Univ.Argonne National Laboratory Gliatech, Inc. Roche Bioscience Montreal, University ofBioconsultants Inc. Hoechst Marion Roussel Scios Inc. Northwestern Univ/Evanston Pasteur Merirux Connaught Lab IDUN Pharmaceuticals Selectide Corporation Northwestern UniversitySerono Laboratories ImClone System, Inc. SmithKline Beecham Pharma. Ohio State UniversityUCLA Protein Core Facility Immunomedics, Inc. Sphinx Pharmaceuticals Penn State UniversityWistar Institute, The Immunova-CHUL Sterling Winthrop Pittsburgh, University of
La Jolla Pharmaceutical Co. Sugen, Inc. Queen's College of CUNYMultiple ACT Synthesizers Ligand Pharm United Biomedical Inc. Texas, Univ. MD Anderson
Advanced ChemTech Chemical MetaPhore Pharmaceuticals, Inc. Zeneca Pharmaceuticals Vermont, University ofHelios Pharmaceuticals Millennium Pharmaceuticals, Inc. Wellesley CollagePeninsula Laboratories, Inc. Molecular Innovations, Inc. Advanced ChemTech does design Yale University
Neurocrine Biosciences custom synthesizers to customers Rutgers UniversityRESEARCH Novartis specific proprietary requirements. Texas A & M University
Affymax Research Institute Ontogen Corporation However, the majority are built to York College, Rsch. Fndn. of Agriculture Canada PerSeptive Biosystems proven Advanced ChemTech specs. Texas, University of,San Antonio --Astra Pain Research Pfizer Central ResearchBecton Dickinson Research Center Pharmacopeia All U.S.A. Advanced ChemTech Multiple ACT SynthesizersCenter for Blood Research Inc. Praecis Pharm Co. synthesizers are shipped with Alabama, University of Chiro Science (Darwin Discovery) Procept operational computers with 110v Florida, University ofImmunex Research & Prolinx, Inc. electrical systems. Otherwise they Georgia State UniversityLos Alamos National Laboratory Quality Controlled Biochemicals are identical to the specifications Harvard UniversityMetabolic Research Labs Rhone-Poulenc Rorer shipped world wide, but with 220 Kansas UniversityNational Research Council Canada SAIC - Frederick volt specs Norte DameNRCC Biotech Research Inst. Sarco Inc. Oklahoma, University ofScripps Research Institute Schering-Plough With pharmaceutical companies Princeton UniversityUSDA, ARS, FAPRL Scriptgen Pharmaceuticals, Inc. operating up to 2 dozen synthesizers Rockefeller UniversityWright Patterson Air Force Base Synaptic Pharmaceuticals per company in several States, plus Tulane University Medical CenterMultiple ACT Synthesizers SynPep university and various laboratorie Utah, University ofBracco Research USA Inc. Telios Pharmaceuticals Inc. operating over 6 each per location, Washington University School of Center for Disease Control (CDC) Texas Biotechnology Advanced ChemTech offers chemists Genetics Institute Upjohn Company innovative solutions in laboratory automation, chemicals and custom MIT Center for Cancer Research Vertex Pharmaceuticals production services for the world's premier research organizations. Research Genetics, Inc. Xoma CorporationUS ARMY Dental Research Zonagen Inc.Wyeth Ayerst Research ZymoGenetics, Inc. Examples of synthesizer sales shows research & educational divisions
Sales Prospectus 3. Changes to Chemical Division and Related Inventory in 2004 The following analysis was completed in January 2004 to assist in identifying factors that contributed to insolvency and to determine future inventory needs as well as items to maintain in ACT’s catalogue for sale. The estimated inventory value of each compound in each class was calculated by the management of ACT’s chemical division. The calculation was based on the average selling price of each compound during 2003. If there were no sales during 2003 the most recent year’s sales were used to calculate the average. The average selling price was then applied to the inventory quantity, extracted from MAS90, the Companies’ automated accounting system, and the value of the inventory calculated. The following is a summary of that investigation.
Estimated Inventory Value of Each Class of Compound Based on analysis performed in January 2004 using existing inventory records
Compound Class Number of Compounds Value of Inventory Fmoc Amino Acids 296 $ 3,900,260 Boc Amino Acids 273 1,283,508 Unusual Amino Acids 83 1,469,936 Amino Acid Esters 191 847,005 Reagents 53 969,792 Resins 563 6,509,753 Total 1459 $14,980,257
The following table represents the results of the grouping process for each class of compound and changes implemented in 2004. Number of Compounds Class Recommended Group
Jan 04Inventory Stock* Custom* Delete* Fmoc Amino Acids 296 108 153 35 Boc Amino Acids 273 59 196 18 Unusual Amino Acids 83 37 32 14 Amino Acid Esters 191 31 94 66 Reagents 53 24 0 29 Resins 563 56 507 0 Total 1459 315 982 162 % of Total 22 67 11 *Chart Key Stock – items with recurring sales Custom – items have been sold, but sporadically Delete – items not sold in last 3 to 5 years LS Associates, LLC
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Sales Prospectus Based on the average selling price and quantities of the compounds that populate each of the groups of each of the classes in January 2004, the estimated sales value was calculated (using the last 5 years average selling price). The results of that process are presented below.
Class Stock Custom Delete Total No. Value No. Value No. Value No. Value
Fmoc 108 $1,841,091 153 $1,907,006 35 $ 152,163 296 $ 3,900,260 Boc 59 407,683 196 875,824 18 - 273 1,283,508 Unusual 37 747,527 32 121,067 14 601,342 83 1,469,936 Esters 31 227,114 94 291,892 66 327,998 191 847,005 Reagents 24 623,410 0 - 29 346,382 53 969,792 Resins 56 1,264,865 507 5,244,888 0 - 563 6,509,753 Total 315 $5,111,691 982 $8,440,678 162 $1,427,886 1459 $14,980,257 LS Associates, LLC
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Sales Prospectus 4. Lists of Intellectual Property Filed with Federal and Foreign Authorities Set forth below is a list of all of the following of which the Trustee has Knowledge that are owned by the Debtors and are material to the operation of either the ACT Business or the AST Business:
(a) U. S. patents and filed patent applications:
1. Patent No. 5,746,982, issued May 5, 1998 titled “Apparatus for automated synthesis of chemical compounds.” Assignee - ACT (Louisville, KY), one of the inventors - Saneii, Hossain (Louisville, KY).
2. Patent No. 6,358,479, issued March 19, 2002 titled “Reaction block assembly for chemical synthesis.” Assignee – ACT (Louisville, KY), one of the inventors – Saneii, Hossain (Louisville, KY).
3. Patent No. 6,294,539, issued September 25, 2001 titled
“Heterocyclic hydroxamic acid derivatives as MMP inhibitors.” Assignee – AST (Louisville, KY).
4. Patent No. 6,462,046, issued October 8, 2002 titled “Heterocycle
derivatives as PPAR-gamma agonists.” Assignee – AST (Louisville, KY).
5. Patent No. 6,583,318, issued June 24, 2003 titled “Method for synthesis of alpha-sulfonamido amide, carboxylic acid and hydroxamic acid derivatives.” Assignee – AST (Louisville, KY).
6. Patent No. 6,600,016, issued July 29, 2003 titled
“Multifunctionalized solid support resins for synthesis for combinatorial libraries and method for using the same.” Assignee – AST (Louisville, KY).1
7. Patent No. 6,620,882, issued September 16, 2003 titled “Novel
solid support template for preparation of highly functionalized heterocycle compounds.” Assignee – AST (Louisville, KY).
1 This patent may be subject to the terms and conditions of the License and Purchase Agreement effective as of December 10, 1999, between Novo Nordisk A/S and Advanced SynTech LLC, as amended by the Amendment to the License and Purchase Agreement dated December 15, 2000, between Novo Nordisk A/S and Advanced SynTech LLC, that granted certain exclusive rights to Novo Nordisk A/S under the patent. The license may have been terminated and the Trustee is seeking to verify such termination. LS Associates, LLC LS Associates, LLC
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Sales Prospectus 8. Patent No. 6,420,123, issued July 16, 2002 titled “Spatially defined
synthesis.” Assignee - ACT (Louisville, KY). 9. Patent No. 6,117,940, issued September 12, 2000 titled “Amino-
Ketone Solid Support Templates.” Assignee - AST (Louisville, KY). 10. Patent Application Serial No. 10/094,599, filed March 8, 2002
titled “Alpha-Isocyanocarboxylate solid support templates, method of preparation and for using the same.” Assignee - AST (Louisville, KY).
11. Patent Application Serial No. 10/202,453, filed July 24, 2002 titled
“System and apparatus for high pressure, high throughput chemical syntheses.” Inventors: Saneii, Hossain, James Shannon and Michael Ferriell. To date, those inventors have not assigned the Patent Application to AST or ACT. See also obligations of respective inventors under their applicable agreements with the Companies.
12. Patent Application Serial No. 10/374,659, filed February 25, 2003
titled “Six membered heterocycle chiral phosphine ligands.” Assignee - AST (Louisville, KY).
13. Patent Application Serial No. 10/417,681, filed April 17, 2003
titled “N-alkyl imidazole derivatives on solid support and method for their preparation.” Assignee – AST (Louisville, KY).
14. Patent Application Serial No. 10/417,969, filed April 17, 2003
titled “Three component reaction involving amine, aldehyde and isocyanate.” Assignee - AST (Louisville, KY).
15. Patent No. 4,746,490, issued May 24, 1998, titled “solid phase
peptide synthesizer.” Assignee – ACT (Louisville, KY), Assignor – Saneii, Hossain (Louisville, KY).
(b) Foreign filed patent applications:
1. Canadian Patent Application Serial No. 2347243, filed October 8, 1999 titled “Amino-Ketone solid support templates.” Assignee - AST (Louisville, KY).
2. Canadian Patent Application Serial No. 2433779, filed January 15,
2001 titled “Heterocycle derivatives as ppar-gamma agonists.” Assignee - AST (Louisville, KY).
LS Associates, LLC
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Sales Prospectus 3. European Patent Application Serial No. 99 951902.8, titled
“Amino-Ketone Solid Support Templates. The issue fee and translations are required to be filed by December 14, 2004.
(c) registered trademarks and service marks and filed applications therefore and Internet domain names:
1. Trademark: HELIOS PHARMACEUTICALS and Design, SN
75/092,641 abandoned May 12, 1998 for failing to file a Statement of Use. 2. Trademark: HELIOS PHARMACEUTICALS and Design, SN
75/092,632 abandoned July 6,1999 for failing to file a Statement of Use. 3. www.advancedchemtech.com 4. www.peptide.com
(d) registered copyrights and filed applications therefore:
1. Copyright registration by ACT titled “Apex multiple peptide synthesizer, Version 1.2: operator’s manual,” RN TX-5-759-401, registered April 8, 2002. Advanced ChemTech, Inc., is listed as the author and claimant. LS Associates, LLC
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Sales Prospectus 5. Description of Benefits and Employee Benefit Plans
To the Knowledge of the Trustee, set forth below is a complete list of all employee benefit plans (as that term is defined in Section 3(1) and 3(2) of the ERISA), available to employees that either of the Debtors has maintained or contributed to since the ACT Trustee Appointment Date:
1. Advanced ChemTech 401-k Profit Sharing Plan. 2. Medical Insurance Plan with United Health Care (Plan # KU4 Care Plus)
dated July 1, 2004. 3. Delta Dental Care Preferred Plan dated July 1, 2004 for dental and vision
insurance. 4. Delta Dental Care Plan, d42A (NMO Plan) dated July 1, 2004 for dental and vision insurance. 5. Life Insurance through American United Group Life dated August 1, 2004. 6. Supplemental Insurance Plan through AFLAC (1002 funded by employees) includes short-term disability, cancer care, accident and sickness. 7. Flex plan 125 through AFLAC available to employees. LS Associates, LLC
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Sales Prospectus 6. Description of Liabilities to be Assumed In addition to the liabilities and obligations of the Debtors described in Section 2.3 of the Asset Purchase Agreement, the Assumed Liabilities shall include the following unpaid liabilities and obligations of the Debtors: 1. all of the Debtors’ unpaid trade payables as of Closing Date that have either accrued after the ACT Chapter 11 Petition Date or the AST Chapter 11 Petition Date, as applicable or that accrued prior to the applicable ACT Chapter 11 Petition Date or AST Chapter 11 Petition Date, but have been allowed and approved for payment by the Bankruptcy Court. 2. all of the Debtor’s accrued payroll obligations and related payroll and other related tax and withholding obligations as of the Closing Date that have either accrued after the ACT Chapter 11 Petition Date or the AST Chapter 11 Petition Date, as applicable or that accrued prior to the applicable ACT Chapter 11 Petition Date or AST Chapter 11 Petition Date, but have been allowed and approved for payment by the Bankruptcy Court. 3. all of the unpaid real and personal property taxes, sales taxes, and other tax obligations of the Trustee, the Debtors and their bankruptcy estates with respect to the ACT Purchased Assets, the AST Purchased Assets, the ACT Business or the AST Business as of the Closing Date that have either accrued after the ACT Chapter 11 Petition Date or the AST Chapter 11 Petition Date, as applicable or that accrued prior to the applicable ACT Chapter 11 Petition Date or AST Chapter 11 Petition Date, but have been allowed and approved for payment by the Bankruptcy Court. 4. all unpaid, accrued commissions owed to the Debtors’ distributors by the Trustee, the Debtors or their bankruptcy estates as of the Closing Date that have either accrued after the ACT Chapter 11 Petition Date or the AST Chapter 11 Petition Date, as applicable or that accrued prior to the applicable ACT Chapter 11 Petition Date or AST Chapter 11 Petition Date, but have been allowed and approved for payment by the Bankruptcy Court. 5. all unpaid, accrued commissions owed to the Debtors’ employees and agents by the Trustee, the Debtors or their bankruptcy estates as of the Closing Date that have either accrued after the ACT Chapter 11 Petition Date or the AST Chapter 11 Petition Date, as applicable or that accrued prior to the applicable ACT Chapter 11 Petition Date or AST Chapter 11 Petition Date, but have been allowed and approved for payment by the Bankruptcy Court.
LS Associates, LLC
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Sales Prospectus 7. List of available environmental reports
1. CVATC Associates – Phase I Environmental Site Assessment – Advanced Chemtech 12/22/03
2. Laboratory Certification Services – clean air testing report – Advanced Chemtech 12/09/96
3. EnviroData – Tier II Site Characterization Report for Release of Hydraulic Oil – 12/09/96
4. EnviroData – Phase II Study – Jim Hannon Oldsmobile Property for Advanced Chemtech
5. Rapid Remediation – Tier I Site Characterization – 5501 Fern Valley Road – 01/31/95
6. Phase II Study - Jim Hannon Oldsmobile Property, 5501 Fern Valley Road
7. Underground Storage Tank Closure Report – 01/14/95
8. Phase I Environmental Assessment – 5501 Fern Valley Road , 09/15/95 LS Associates, LLC
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TRUSTEE’S REPORT For the month ended October 31, 2004
Debtor Name : Advanced Chemtech , Inc. and Advanced Syntech, LLC Case Number: 03-31381, 03-31382 The Bankruptcy Court for the Western District of Kentucky (the “Bankruptcy Court”)
On November 25, 2003, Robert W. Leasure of LS Associates, LLC was appointed as Chapter 11 trustee of Advanced Chemtech Inc. and Advanced Syntech, LLC (the “Company”) pursuant to the order of the same date. FINANCIAL PERFORMANCE The financial numbers below have been prepared by the Company and reviewed by the trustee. The Company has sought to use reasonable care in compiling these statements, however they are unaudited. The trustee cannot make representations or warranties with respect to the financial statements. This chart summarizes the Company’s financial results for the past 8 months :
Mar 04 April 04 May 04 June 04 July 04 Aug 04 Sept 04 Oct 04 Revenue $651,590 $339,786 $694,521 $371,656 439,902 361,017 275,936 428,453 Gross Profit 312,001 153,558 327,142 148,026 181,171 133,269 76,691 144,590 Operating Expenses
139,756 115,695 112,800 106,591 90,328 99,421 101,182 89,543
EBITDA 172,245 37,863 214,342 41,435 90,843 33,848 (24,491) 55,047 Interest, Depreciation and Taxes
54,623 52,411 52,412 51,281 49,788 46,022 43,613 35,229
Extraordinary Expense (Income)**
5,236 38,891 73,042 (1,678,768) 61,495 68,425 (1,320,694) 79,964
NET INCOME
112,386 (53,439) 88,888 1,668,917 (20,440) (77,602) 1,252,590 (60,146)
** Extraordinary expenses include accrued professional fees, chemical and facility clean-up efforts, legal fees and U.S. Trustee fees and in March include the gain of $ 60,000 from fixed asset auction sales. In June a $ 1,748,134 gain is recorded from asset sales to include the Bluegrass Parkway Building. In Sept 04 the write down of Bank One Debt for the 5501 Building is recorded
1
SIGNIFICANT EVENTS SALE OF ASSETS
• On October 25, 2004, order was signed authorizing the hiring of Wardlow Auctions, Inc in connection with the proposed sale of the Debtors miscellaneous office equipment, furniture and ancillary equipment which is no longer needed or used in the day to day operations of the business. Wardlow has begun the set-up of the auction and expects auction to take place in the early part of December. This will be the third auction of excess equipment. The first two sales mainly consisted of chemical and pharmaceutical related items. This auction will be on site versus the web based auctions previously used for a majority of the excess chemical related equipment.
CONSOLIDATING OPERATIONS
• ACT has been actively consolidating some operations and activities into the chemical building at 5609 Fern Valley Road
CHEMICAL CLEAN-UP
• Ashland Chemical Company, with the assistance of ACT employees, has been performing the chemical clean-up. The clean-up was completed as expected the first week in November. This process has helped provide space for the operations of the 2 buildings to be consolidated. In addition , this clean-up was an anticipated requirement for a sale of the business to take place. It is estimated that the clean-up over September, October and November will cost approximately $ 80,000 for services from Ashland Chemical and approximately $ 20,000 in internal labor and cost. These expenses are included in the restructuring cost in October and November.
ACT EUROPE
• On September 8, a “ wind-up” petition was authorized in the UK against ACT Europe which was ACT’s wholly owned subsidiary acting as its sole distributorship in Europe. This was the result of an off balance sheet liability resulting from a contract between ACT and a prior partnership arrangement. After 2 months of settlement discussions, the issue could not be resolved.
During this period of a threatened shut-down, ACT experienced a significant reduction in sales to Europe. It appears to have been one of the factors impacting ACT sales for June through October of 2004.
2
• Since the wind-up of ACT Europe, ACT Inc has replaced its European distributorship with Activotec. Activotec now has some of ACT Europe’s prior employees and will be capable of selling and servicing ACT Inc instruments throughout Europe.
• A liquidator has been appointed in the U.K. to liquidate assets of ACT Europe for
the benefit of the creditors. ACT , Inc will be the largest creditor and as such will actively follow and support the activities of the liquidator to maximize the recovery for ACT,Inc.
OTHER EVENTS
• In August and September, two prior officers of ACT , Dr Saneii and Dr Flannigan , introduced a new company in the market. On September 29,2004, Dr. Flannigan and the trustee entered an Agreed Order which ended Dr. Flannigan’s relationship with the new competing company and eliminated Dr. Flannigan’s ability to compete directly with ACT for a period of time.
In addition , in September the Judge issued a Temporary Restraining Order ( “TRO”) which temporarily has eliminated Dr. Saneii’s ability to compete with ACT. This TRO is currently in effect until December 1, 2004 at which time we hope to have an Agreed Order or a hearing. SALE OF BUSINESS
• As a result of the liquidation of the European wholly owned distributor , the reemergence of prior officers with a competing business and the reduction in sales from June to August 2004, on September 16, 2004, the “ stalking horse” buyer for the business withdrew their offer. Since this withdraw , we have addressed the issues of concern as outlined above. October sales and orders saw a significant improvement as well as the largest month of new orders for ACT over the last year.
• The trustee has completed a draft of an asset purchase agreement along with a sale procedure motion. The motion to adopt the sale procedures was submitted on November 4, 2004.
3
Chapter 11 Monthly Operating Report
Monthly Reporting Questionnaire
CASE NAME: Advanced ChemTech, Inc. . CASE NUMBER: 03-31381___________________________________ MONTH OF: Oct, 2004_ __________________________________ 1. Payroll State the amount of all executive wages paid and taxes withheld and paid.
Name and Title Wages Paid . Taxes . of Executive . Gross . Net . Due . Paid . Total Executive Payroll: $ 0.00 .
2. Insurance Is workers’ compensation and other insurance in effect? Y . Are payments current? Y . If any policy has lapsed, been replaced or renewed, state so in the schedule below. Attach a copy of the new policy’s binder or cover page. Date Coverage Expiration Premium Coverage Type Name of Carrier Amount . Policy # Date . Amounts Pd. Thru Varies Casualty Chubb Group by property 35340588 10/2/05 31,487.00 Dec. 2004 Workers’ Comp A1K 2,000,000 2803-1671610/2/05 23,940.00 Nov. 2004 General Liab. Chubb Group 2,000,000 35797588 10/2/05 - Dec. 2004 Vehicle Chubb Group 1,000,000 73222923 10/2/05 3,304.39 Dec. 2004 Product Liab. Chubb Group 1,000,000 35797539 10/2/05 8,332.00 Dec. 2004 Umbrella Chubb Group 1,000,000 79778950 10/2/05 1,258.00 Dec. 2004
Chapter 11 Monthly Operating Report
Monthly Reporting Questionnaire
CASE NAME: Advanced ChemTech, Inc. . CASE NUMBER: 03-31381 . MONTH OF: Oct, 2004 ____________________________________ Bank Accounts Account Type .
Operating_ Funding__ Payroll____ Other____ Total______
Bank Name Bank One_ Bank One__ Bank One____ Bank One___
Account Number 642687552 623728375_ 626999759____ 636157158__
Beginning Balance 123,939.98 __________ ___ 17,805.27 _82,672.96__ __224,418.21_ Plus: Deposits _59,512.96 __________ _____________ _378,175.20_ ___437,688.16_
Less: Disbursements -225,877.00 __________ __-169,823.43_ ___________ __ -395,700.43_
Transfers 242,929.67 __________ ___165,168.38 -408,098.05_ ____________
Ending Balance 200,505.61 __________ ___ 13,150.22 __52,750.11__ __266,40594_ Postpetition Payments List any postpetition payments to professionals and payments on prepetition debts In the schedule below (attach a separate sheet if necessary). Payments To Amount___ Date____ Check #___ Professionals (attorneys, Accountants, etc.): ___LS Associates_____ ___________ 10,000.00_ _10/8/04____ _92597____ ___LS Associates_____ ___________ 3,000.00_ _10/15/04___ _92650____ Frost Brown Todd______________ __5,000.00_ 10/15/04___ _92651____ ___LS Associates_____ __________ _8,040.24_ _10/25/04__ 92693____ ___Frost Brown Todd______________ __5,000.00_ _10/27/04__ __92722____ ___LS Associates_________________ _30,000.00_ _1027/04__ 92723_____ Prepetition Creditors: _________________________________ ___________ __________ __________ _________________________________ ___________ __________ __________
Chapter 11 Monthly Operating Report
Monthly Reporting Questionnaire
CASE NAME: Advanced ChemTech, Inc. . CASE NUMBER: 03-31381 . MONTH OF: Sep, 2004_ ___________________________________ Postpetition Payments Cont’d Postpetition Payment List any postpetition payments to professionals and payments on prepetition debts In the schedule below (attach a separate sheet if necessary). Payments To Amount___ Date____ Check #___ Professionals (attorneys, Accountants, etc.):
Chapter 11 Monthly Operating Report
Monthly Reporting Questionnaire CASE NAME: Advanced SynTech, Inc. . CASE NUMBER: 03-31382___________________________________ MONTH OF: Aug, 2004 _ ________________________________ This business is closed, there is no payroll, Insurance, Bank Accounts, or Post-Petition payments to report.
CASE NAME: FORM OPR-2REV 2/90
CASE NUMBER: MONTH ENDED:
FILING RevisedDATE MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH
31-Mar-03 30-Sep-03 31-Dec-03 29-Feb-04 31-Mar-04 30-Apr-04 31-May-04 30-Jun-04 31-Jul-04 31-Aug-04 30-Sep-04 31-Oct-04LIABILITIES
POST-PETITION LIABILITIESTrade Payable 56,455 231,362 230,980 96,009 147,225 62,861 53,460 37,476 78,976 91,665 64,213 109,172
All other Liabilities 283,807 631,120 845,350 1,093,011 1,085,593 1,101,136 1,291,994 1,211,619 1,160,285 1,182,062 1,375,743 1,386,926
TOTAL POST PETITION LIABILITIES
PRE PETITION LIABILITIES
Priority debt
Secured debt
Unsecured debt
TOTAL PRE PETITION LIABILITIES
TOTAL LIABILITIES
SHAREHOLDERS' EQUITY (DEFICIT)
NOTES PAYABLE H. SANEII
COMMON STOCK
PAID-IN CAPITAL
RETAINED EARNINGS
Through filing date
Post filing date
HOLDERS' EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 3,852,325
4,535,688
-11,616,736
-4,276,380
50,350
111,207
8,128,705
2,643,111
632,167
6,632,607
1,496,098
196,409
5,804,031
3,884,245
4,535,688
-11,556,590
-4,216,234
50,350
111,207
8,100,479
2,643,111
631,995
6,660,523
1,439,956
196,409
5,832,119
4,940,126
4,535,688
-12,809,179
-5,468,823
50,350
111,207
10,408,949
2,643,111
674,903
9,135,222
1,273,727
196,409
8,263,910
5,024,512
4,535,688
-12,731,577
-5,391,221
50,350
111,207
10,415,733
2,643,111
674,903
9,176,472
1,239,261
196,409
8,305,160
5,603,512
4,535,688
-14,380,052
-7,039,696
50,350
111,207
12,643,208
2,643,111
674,903
11,297,754
1,345,454
196,409
10,426,442
5,330,709
4,535,688
-14,468,940
-7,128,584
50,350
111,207
12,459,293
2,643,111
674,903
11,295,295
1,163,998
196,409
10,423,983
5,570,460
4,535,688
-14,415,501
-7,075,145
50,350
111,207
12,645,605
2,643,111
674,903
11,412,787
1,232,818
196,409
10,541,475
-14,527,887
18,013,907 17,934,383
5,313,886 5,347,426
33,540
4,535,688 4,535,688
111,207 111,207
50,351 50,351
616,640 616,640
12,700,021 12,586,957
12,700,021 12,246,695
1,115,395 1,061,943
11,388,217 10,988,343
196,409 196,409
Advanced ChemTech, Inc.
03-31381 October 31, 2004
5-Mar-03
340,262
10,826,550
11,697,862
2,643,111
1,076,330
196,409 196,409
862,482
10,789,475
674,903 674,903
11,660,787
12,560,344 12,737,117
2,643,111
50,350 50,350
111,207 111,207
4,535,6884,535,688
-14,726,722
-7,386,366
-14,345,088
5,555,612
-7,004,732
5,350,751
10,789,475
1,189,020
196,409
674,903
11,660,787
12,849,807
2,643,111
50,350
111,207
4,535,688
-7,187,531
5,662,276
1,249,095
196,409
8,367,160
674,903
9,238,472
10,487,567
2,643,111
50,350
111,207
4,535,688
-12,711,136
-5,370,780
5,116,787
CASE NAME:
CASE NUMBER:
MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH
ASSETS
CURRENT ASSETS
Cash
Other negotiable instruments (i.e. CD's T-Bills)
Accounts receivable (See OPR-3)
Less allowance for doubtful accounts
Inventory, at lower of cost or market
Prepaid expenses and deposits
Investments
Other:
163,763 175,087 0 0
TOTAL CURRENT ASSETS
PROPERTY, PLANT AND EQUIPMENT, AT COST
Less accumulated depreciation
NET PROPERTY, PLANT AND EQUIPMENT
OTHER ASSETS
Investment-A/R ACT Europe LTD
Investment Advanced Syntech LLCTOTAL ASSETS
* Itemize if value of "Other Assets" exceeds 10% of "Total Assets". # 0 0 0 0 0 0 0 0
0 3,852,325
0 0
0 0
2,012,525
-840,846
0 1,171,679
72,022
2,681
2,680,646
542,546
# -27,201
1,977,147
31-Oct-04
113,451
0 3,884,245
0 0
0 0
2,012,525
-829,189
0 1,183,336
34,095
1,978
2,700,909
491,015
# -48,735
2,009,579
30-Sep-04
212,977
0 4,940,126
0 0
0 0
5,978,133
-4,018,102
0 1,960,031
74,822
4,206
2,980,095
618,353
# -62,154
2,012,114
31-Aug-04
157,667
0 5,024,512
0 0
0 0
5,978,133
-4,006,445
0 1,971,688
109,185
2,148
3,052,824
657,601
# -68,851
1,946,014
31-Jul-04
242,964
0 5,603,512
0 0
0 0
5,969,116
-3,975,596
0 1,993,520
10,195
122,477
3,609,992
1,243,172
# -14,211
1,989,343
31-May-04
259,016
0 5,330,708
0 0
0 0
5,969,116
-3,960,172
0 2,008,944
14,343
121,109
3,321,764
842,455
# -14,211
2,054,167
30-Apr-04
303,901
0 5,570,460
0 0
0 0
5,969,116
-3,944,747
0 2,024,369
26,930
171,641
3,546,091
1,337,139
# -330,605
2,041,751
31-Mar-04
299,235
17,934,3835,487,690 5,580,604
18,013,907
2,499,754 2,683,019
2,201,456 2,184,527
-3,735,493 -3,752,422
5,936,949 5,936,949
7,825,007 7,486,233
Accts. Rec. ACT Europe (Net)
Non-trade Receivables 54,049 18,073
65,011 84,723
5,803,553 5,755,189
-32,274 -32,274
1,069,344 963,425
865,324 697,097
Advanced ChemTech, Inc.
03-31381
5-Mar-03 31-Mar-03
FILINGDATE
30-Sep-03 31-Dec-03
170,244 282,244
1,106,840 845,146
-330,605 -330,605
2,385,723 2,357,802
34,895 71,472
95,966 69,755
3,463,063 3,295,814
5,945,887 5,953,387
-3,853,338 -3,898,450
2,092,549 2,054,937
0 0
005,350,7515,555,612
29-Feb-04
546,194
1,196,032
# -330,605
2,053,083
55,592
103,753
# 3,624,049
5,967,550
-3,929,323
0 2,038,227
# 5,662,276
0 0
0 0
30-Jun-04
169,265
967,158
# -13,931
1,977,687
36,250
2,263
3,138,692
5,969,116
-3,991,021
0 1,978,095
0 5,116,787
0 0
0 0
CASE NAME: SUMMARY OF ACCOUNTS RECEIVABLE FORM OPR-3REV 2/90
CASE NUMBER:
0 - 30 31 - 60 61 - 90 OVERTOTAL DAYS DAYS DAYS 90 DAYS
326,238 146,825 116,274 307,890
Allowance for doubtful accounts )
MONTH:
Allowance for doubtful accounts )
MONTH:
Allowance for doubtful accounts )
MONTH:
Allowance for doubtful accounts )
MONTH:
Allowance for doubtful accounts )
MONTH:
Allowance for doubtful accounts )
MONTH:
Allowance for doubtful accounts )
MONTH:
Allowance for doubtful accounts )
MONTH:
Allowance for doubtful accounts )
MONTH:
Allowance for doubtful accounts )
MONTH:
Allowance for doubtful accounts )
MONTH:
Allowance for doubtful accounts )
MONTH:
Allowance for doubtful accounts )
MONTH:
Allowance for doubtful accounts )
MONTH:
Allowance for doubtful accounts )
NOTE: Total accounts receivable and total allowance for doubtful accounts shown here must agree with the same items as shown on Form OPR-1.
-27,201) () (
26,415 43,494
( -27,201 ( ) (
392,988 79,649October 31, 2004 542,546
-48,735) () (
21,029 79,732
( -48,735 ( ) (
278,346 111,908September 30, 2004 491,015
-62,154) () (
31,246 94,973
( -62,154 ( ) (
217,491 274,643August 31, 2004 618,353
-14,211) () (
93,580 220,661
( -14,211 ( ) (
739,552 189,379May 31, 2004 1,243,172
-14,211) () (
185,084 98,716
( -14,211 ( ) (
290,282 268,373April 30, 2004 842,455
( -330,605) (
378,463
( -330,605 ( ) ( )
539,944 345,000March 31, 2004 1,337,139
) ( ()) (( -330,605 (
1,196,032 346,916
) ( 317,072) ( 6,846
408,835
( 330,605 ( ) ( 6,687
317,072
December 31, 2003 845,145 317,462 93,956 24,892
6,846 ) (6,687 ) (
152,243 387,783
( 330,605 ( ) (
249,114 227,574November 30, 2003 1,016,714
) ( 317,072) ( 6,846
272,825
( 330,605 ( ) ( 6,687
317,072
October 31, 2003 1,120,397 396,879 307,062 143,631
6,846 ) (6,687 ) (
170,502 179,377
( 330,605 ( ) (
546,624 210,337September 30, 2003 1,106,840
32,274 32,274()
MONTH ENDED
(()
Advanced ChemTech, Inc.
03-31381
DATE OF FILING: March 5, 2003 897,227
)
October 31, 2004
()(
(
592,390
January 31, 2004 1,310,809
207,914February 28, 2004
93,220713,920 190,523 313,146
( 330,605 ( ) ( )
(
323,9186,687 ) (
-330,605
48,812
73,732
22,236
) ()
June 30, 2004 967,158 319,625 428,421
-13,931
196,876
( -13,931 ( ) (
145,770July 31, 2004 657,601
) (
402,421
( -68,851 ( ) ( -68,851
57,90451,506
) (
CASE NAME: SCHEDULE OF POST PETITION LIABILITIES
CASE NUMBER:
DATE TOTAL 0 - 30 31 - 60 61 - 90 OVER169929 DUE DUE DAYS DAYS DAYS 90 DAYS
TAXES PAYABLE
State & Local Taxes 3,464 3,464
Attach separate page if necessary.
Note: Total postpetition liabilities shown here must agree with the same item as shown on Form OPR-2.
1641,489,587 6,347 0TOTALS 1,496,098
566,573 566,573Accrued Expenses
164Trade Payables (Various Vendors) 6,347 102,661 0
0
459,971 459,971
Property Tax
POSTPETITION SECURED DEBT
POSTPETITION UNSECURED DEBT
ACCRUED INTEREST PAYABLE
TRADE ACCOUNTS PAYABLE & OTHER:(list separately)
660Various
106,098Various
72,622
Various Various 109,172
57,721
Various
106,098
660
147,412
33,590
Various
Advanced ChemTech, Inc.
03-31381
Accrued Distributor Commission
Deferred Warranty & Service Contracts
Accrued Payroll, Vacation & EE Benefits
DATEINCURRED
Various
FORM OPR-4
REV 2/90MONTH ENDED: October 31, 2004
0
2,418
3,503
2,418
0
3,098 3,098
57,721
72,622
0
0
147,412
0
Federal Income Tax
FICA - Employer's Share
FICA - Employee's Share
Unemployment Tax
2,4182,418
Customer Deposits
Sales Tax
TOTAL TAXES PAYABLE
33,590Various
Various
0
3,503
CASE NAME:
CASE NUMBER: 03-31381
Total Accrued10/31/04
Legal FeesFrost Brown Todd 217,497 Mapother 13,033 Stites Harbison 22,335 Seiller and Handmaker 1,948 European Counsel 5,000
Total Legal Fee Accrual 259,813
Trustee Fees 117,227
Management Fees 119,832
Tax Return Preparation Fees 16,000
Other - ENA, TRO , Chemical Clean-up 53,702
Total Accruals 566,573
Advanced Chemtech, Inc
CASE NAME: STATEMENT OF INCOME (LOSS) FORM OPR-5REV 2/90
CASE NUMBER:
FILINGMONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH TO DATE
30-Sep-03 31-Dec-03 29-Feb-04 31-Mar-04 30-Apr-04 31-May-04 30-Jun-04 31-Jul-04 31-Aug-04 30-Sep-04 31-Oct-04
NET REVENUE (INCOME)
COST OF GOODS SOLD
Inventory Purchase
Labor Incurred
Production Overhead Costs
Change in Inventory and Other Costs 3,178,879 1,280 170,611 24,491 (19,480) 73,461 (18,071) 22,760 (61,889) (5,887) 33,123
TOTAL COST OF GOODS SOLD
GROSS PROFIT
OPERATING EXPENSES
Selling and Marketing
General and Administrative
Other Exp:
TOTAL OPERATING EXPENSES
INCOME BEFORE INTEREST, DEPRECIATION TAXES OR EXTRAORDINARY EXPENSES
INTEREST EXPENSE
DEPRECIATION
INCOME TAX EXPENSE (BENEFIT)
EXTRAORDINARY INCOME (EXPENSE) *
NET INCOME (LOSS)
* Requires Footnote
Gain/(Loss) on Sale of Assets/Other Income -3,974 11,752 20 10,920 -1,800 1,748,134 2,864 -997 1,474,512 581Restructuring Expense/ External -83,917 -71,737 -65,256 -64,920 -64,738 -64,468 -64,359 -64,446 -144,921 -75,221Restructuring Expense/ Internal 0 -5,729 0 0 -7,638 -6,030 0 -2,982 -8,897 -5,324Gain/(Loss) on Discontinued Operations 0 279 60,000 15,109 1,131 1,127 0 0 0 0
-87,891 -65,435 -5,236 -38,891 -73,045 1,678,763 -61,495 -68,425 1,320,694 -79,964
11,657
0
1,320,694
1,252,590
101,182
(24,491)
31,956
199,245
76,691
49,101
52,081
275,936
33,940
116,436
54,756
11,658
0
(68,425)
(77,602)
99,421
33,848
31,367
227,748
133,269
48,212
51,209
361,017
108,269
130,558
50,810
15,424
0
(73,042)
88,888
112,800
214,342
36,988
367,379
327,142
46,637
66,163
694,521
129,185
124,392
40,341
15,424
0
(38,891)
(53,439)
115,695
37,863
36,987
186,228
153,558
46,980
68,715
339,786
38,324
120,458
46,926
15,424
0
(5,236)
112,386
139,756
172,245
39,199
339,589
312,001
52,518
87,238
651,590
127,346
140,888
46,864
(11,616,733)
-8,647,305
93,524(14,188,364)
(87,891)
(88,538)
0 -6,071
(11,042,853)
305,922
(5,663)
15,037
39,387 670,933
22,688
(1,998,644)
32,303
53,777
136,794 2,595,130
0
76,172
81,288 1,451,792
1,143,338
(52,153)
55,506
190,571 596,486
128,325
10,016,682
(3,020,011)
254,813
43,342 1,303,284
3,546,403
48,330
3,033,615
86,995
152,944
57,247 1,954,481
203,173
10,613,168
216,218
445,384
MONTH ENDED:
Advanced ChemTech, Inc.
03-31381 October 31, 2004
665,254
3,685,265
(3,096,183)
727,774
51,550
131,301
401,792
325,982
44,074
68,908
15,836
0
(65,435)
112,982
213,000
38,205
371,656
64,177
126,074
51,450
223,630
148,026
46,302
60,289
106,591
41,435
35,857
15,424
0
1,678,763
1,668,917
439,902
64,586
118,355
53,030
258,731
181,171
16,443
73,885
90,328
90,843
34,364
15,424
0
(61,495)
(20,440)
428,453
91,311
108,403
51,026
283,863
144,590
45,405
44,138
89,543
55,047
23,572
11,657
0
(79,964)
(60,146)
CASE NAME:Footnotes to Income Statement
CASE NUMBER:
Notes to all monthsDue to sizeable adjustments by prior management in September 2003, inventory value and subsequent cost of goods soldare difficult to estimate. We have taken a conservative approach to cost of sales by expensing purchases, labor andoverhead expenses in the month in which they have been incurred. This was based on reviewing standard cost of sales and sales and overhead absorption entries in October, November and December. There appeared to be significantcapitalization of overhead during these periods and this coupled with prior management's sizeable inventory write-offit was felt to be prudent to take a more conservative approach to costing.
April 2004During April we have restated the reports to match the financial records of Advanced Chemtech Inc. When these reports wereoriginally filed by previous management, they did not match the trial balance associated with the financial statements. We havemade no attempt to change any of the entries as recorded by the previous management but only to accurately report that which has been recorded to the court.
September 2004(Gain) /Loss on Sale of Assets - other Income
2,400,000 auction of 5501 Fern Valley Bldg and the resulting reduction in secured pre-petition debt(765,038) write-off of attributable buildings and leasehold improvements realted to 5501 Fern Valley (176,247) write off remaining AR from ACT Europe in September
(5,282) Reclass and adjust accrued vacation pre and post petition to actual21,079 gain from auction of excess chemical related equipment in September
1,474,512
Restructuring Expenses80,000 Chemical Clean-up costs - see trustee's report for additional detail 64,921 Charges to Extraordinary items are for Consultants/Trustee fees for September as well as a provision for anticipated
144,921 Legal Fees associated with the bankruptcy
October 2004Charges to Extraordinary items are for Consultants/Trustee fees for October as well as a provision for anticipatedLegal Fees associated with the bankruptcy and internal costs for clean up matters and auction preparation.Approximately $3,000 in costs were incurred to convert payroll from the shell ACST Management Company to ACT inpreparation for the eventual sale of the company.
Advanced ChemTech, Inc.
03-31381
CASE NAME: STATEMENT OF SOURCES AND USES OF CASH
CASE NUMBER:FILING
MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH MONTH TO DATE30-Sep-03 31-Dec-03 31-Jan-04 29-Feb-04 31-Mar-04 30-Apr-04 31-May-04 30-Jun-04 31-Jul-04 31-Aug-04 30-Sep-04 31-Oct-04
SOURCES OF CASHIncome (loss) from operations
Sept is Case to Dateadd: depreciation, amortization, & other non-cash items
CASH GENERATED FROM OPERATIONS
add: Decrease in Assets
Accounts Receivable
Inventory
Prepaid Expenses & Deposits
Property, Plant, & Equipment
Other - Non Trade Receivables
Other Investment in Subs
add: Increase in Liabilities
Notes Payable H. Saneii
Pre-Petition Liabilities
Post-Petition Liabilities
TOTAL SOURCES OF CASH (A)
USES OF CASHIncrease in assets:
Accounts Receivable
Inventory
Prepaid Expenses & Deposits
Property, Plant, & Equipment (8,938) 0 (10,418) (3,745) (1,566) 0 0 0 (9,017) 0 765,038 0
Other - Non Trade Receivables
Decrease in Liabilities
Pre-Petition Liabilities
Post-Petition Liabilities
TOTAL USES OF CASH (B)
NET SOURCE/(USE) OF CASH (A-B)
BEGINNING CASH BALANCE (See OPR-1)
ENDING CASH BALANCE (See OPR-1)
(1,709,661)
55,310
157,667
212,977
(2,474,699)
1,764,971
166,229
2,535
40,727
177,315
1,252,589
11,657
1,264,246
113,919
303,902
259,016
(400,717)
64,824
(1,368)
181,456
2,459
(402,085)
(44,886)
357,199
88,888
15,424
104,312
4,148
(198,728)
4,667
299,235
(12,416)
(68,820)
(117,492)
(53,439)
15,425
(38,014)
178,290
12,587
50,532
127,810
546,194
(141,107)
(67,888)
(248,000)
11,332
(458,561)
282,244
(465,664)
(12,315)
(488,397)
(141,300)
0 (14,227,243)
(246,959)
92,993
347,097
15,424
1,615,835
120,348
Advanced ChemTech, Inc.
03-31381 MONTH ENDED:
(73,500)
(14,345,088)
October 31, 2004
(11,310,813)
357,935 311,895
(11,616,736)
117,845 305,923
93,524
15,836
105,311
15,037
112,386
260,835
(1,021,045)
0
182,8347,942
7,987,444
0
126
7,987,444
2,459
862,482 43,798 1,499,476
0
4,562,344211,602 203,395
(3,567,258)0
(158,553)
(1,002,159)
(1,053,014) (49,760)
(751,872)
837,154 20,109 865,323
0 405,250
140,944
282,244 113,4510 142,075 140,944 546,194 299,235 303,902
3,417,830
262,135(695,079)
0
34,140 3,930,699
30,116
125,814
28,662
2,026,471
(88,538)
15,038
171,568
(41,917)
2,026,471
0
179,561
(49,760)
0
(41,184)
109,360
114,778
178,905
7,938
19,697
430,678
33,309
(5,270,000)
(21,683)
(225,749)
(104,293)
(25,428)
(151,918)
1,668,916
15,425
1,684,341
275,734
11,656
120,214
2,091,945
(89,751)
259,016
169,265
(26,055)
(96,359)
(2,181,696)
(2,059,282)
(20,441)
15,424
(5,017)
364,477
31,673
(163,648)
227,485
(72,935)
(62,000)
(9,834)
(153,786)
73,699
169,265
242,964
(77,602)
11,657
(65,945)
32,551
34,363
34,466
35,435
(66,100)
(13,382)
(41,250)
(120,732)
(85,297)
242,964
157,667
(60,146)
11,657
(48,489)
32,432
56,142
40,085
(73,065)
(37,927)
(703)
(27,916)
(139,611)
(99,526)
212,977
113,451