==========================================START OF PAGE 1====== UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES ACT OF 1933 Release No. 7410 / April 1, 1997 SECURITIES EXCHANGE ACT OF 1934 Release No. 38458 / April 1, 1997 ADMINISTRATIVE PROCEEDINGS File No. 3-9186 --------------------------- : : In the Matter of : : QUALITY PRODUCTS, INC., : ORDER MAKING FINDINGS AND : IMPOSING CEASE-AND-DESIST ORDER Respondent. : : --------------------------- I. In these public cease-and-desist proceedings instituted on November 14, 1996 by the Securities and Exchange Commission ("Commission") pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Section 21C of the Securities Exchange Act of 1934 ("Exchange Act"), Respondent Quality Products, Inc. ("QPI") has submitted an Offer of Settlement ("Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or in which the Commission is a party, prior to a hearing pursuant to the Commission's Rules of Practice, and without admitting or denying the findings contained herein, except as to the jurisdiction of the Commission over it and over the subject matter of this proceeding and as to the findings contained in Section II paragraphs A and B, below, which are admitted, QPI, by its Offer, consents to the entry of findings and cease-and-desist order set forth below. II. On the basis of this Order Making Findings and Imposing Cease- and-Desist Order ("Order") and the Offer, the Commission finds that:-[1]- A. QPI, a Delaware corporation, registered its common stock with the Commission pursuant to Section 12(g) of the Exchange Act on November 29, 1989. B. QPI filed periodic reports with the Commission on Forms 10-K and 10-Q during the period 1989 through June 1995. C. During the periods of May 1992 and March 1994, Respondent QPI violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, in that, in the offer and sale of QPI's securities, and in connection with the purchase and sale of such securities, by the use of the mails, the means or instruments of transportation or communication in interstate commerce, and the means or instrumentalities of interstate commerce, QPI, directly or indirectly: (a) employed devices, schemes and artifices to defraud; (b) made untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and (c) engaged in acts, practices, transactions and courses of business which would and did operate as a fraud and deceit upon persons, including purchasers of such securities. As part of the aforesaid conduct, QPI: (a) prepared and disseminated to the public, press releases dated March 9, 1994, March 10, 1994 and March 14, 1994 which contained misrepresentations and omissions of material facts concerning two purported licensing agreements with The Walt Disney Company, Inc. and QPI's projected sales as a result of the purported licensing agreements; and (b) filed with the Commission and disseminated to the public, an Offering Statement under Regulation A on a Form 1- A filed on May 20, 1992, which materially overstated the value of certain assets, i.e., engineering drawings and specifications. D. During the period from 1989 and continuing through September 1993, Respondent QPI violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, in that, in connection with the purchase and sale of QPI's securities, by the use of the mails, and the means or instrumentalities of interstate commerce, QPI, directly or indirectly: (a) employed devices, schemes and artifices to defraud; (b) made untrue statements of material facts and omitted to state material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; and ---------FOOTNOTES---------- -[1]- The findings herein are made pursuant to QPI's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding. (c) engaged in acts, practices and courses of business which would and did operate as a fraud and deceit upon persons, including purchasers of such securities. As part of the aforesaid conduct, QPI filed with the Commission and disseminated to the public, periodic reports on Forms 10-K and 10-Q between 1989 and 1993, which contained materially false and misleading statements concerning QPI's financial condition. Specifically, the financial statements included in those periodic reports overstated the value of certain assets, i.e., engineering drawings and specifications, by material amounts ranging from approximately $3 million to $8 million. E. During the period from 1989 and continuing through September 1993, Respondent QPI violated Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 promulgated thereunder, by filing with the Commission, and disseminating to the public, periodic reports on Forms 10-K and 10-Q which contained materially false and misleading statements. As part of the aforesaid conduct, QPI filed the with the Commission the false and misleading Forms 10-K and 10-Q as detailed in Section II. paragraph D., above. F. During the period from September 1995 and continuing through the present date, Respondent QPI violated Section 13(a) of the Exchange Act and Rules 12b-25, 13a-1 and 13a-13 promulgated thereunder, by failing to file with the Commission the required periodic reports on Forms 10-K and 10-Q, and by failing to file all required Forms 12b-25 disclosing its inability to file the required periodic reports timely and the reasons therefore in reasonable detail. III. In view of the foregoing the Commission deems it appropriate and in the public interest to impose the sanctions specified in the Offer submitted by QPI. Accordingly, IT IS ORDERED THAT, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, QPI cease and desist from committing or causing any violation or future violation of Section 17(a) of the Securities Act, and Sections 10(b) and 13(a) of the Exchange Act and Rules 12b-20, 12b-25, 13a-1 and 13a-13 thereunder. For the Commission, by its Secretary, pursuant to delegated authority. Jonathan G. Katz Secretary ==========================================START OF PAGE 3======