As filed with the
Securities and Exchange Commission on July 23, 1999.
REGISTRATION NO. 333-72405
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM S-1
AMENDMENT NO. 4
TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
R-Tec Technologies, Inc.
(Exact Name of Registrant as Specified in Its Charter)
New Jersey 2851 22-3615979
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Classification Code Identification No.)
Incorporation or Number)
Organization)
61 Mallard Dr.
P.O. Box 282
Allamuchy, New Jersey, 07820
(888) 299-7832
(Address and Telephone Number of Registrant's Principal Place of Business)
Marc M. Scola
61 Mallard Drive
Allamuchy, New Jersey 07820
(888) 299-7832
(Name, Address and Telephone Number of Agent for Service)
Copies to:
Bruce Brashear, Esq.
Brashear & Associates, P.L.
Gainesville, FL 32601
(352) 336-0800
Approximate Date of Proposed Sale to the Public: As soon as practicable from
time to time after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each
Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price Aggregate Offering Amount of
Registered Registered Per Share 1 Price Registration Fee
<S> <C> <C> <C> <C>
common stock 3,750,000 Shares $8.00 $30,000,000.00 $8,340.00
($.00001 par value)
</TABLE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
1 Estimated solely for the purpose of calculating the amount of the registration
fee in accordance with Rule 457 under the Securities Act.
<PAGE>
R-Tec Technologies, Inc.
CROSS-REFERENCE SHEET
Item Number and Heading Heading in Prospectus
1. Front of the Registration
Statement and Outside Front
Cover Page of Prospectus ...............Facing pages; Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus ..............Inside Front and Outside Back
Cover Pages of Prospectus
3. Summary Information and Risk
Factors ................................Prospectus Summary; Risk Factors
4. Use of Proceeds.........................Prospectus Summary; Use of
Proceeds; Description of Business
5. Determination of
Offering Price .........................Cover Page; Prospectus Summary;
Risk Factors; Determination of
Offering Price
6. Dilution................................Dilution; Comparative Data
7. Selling Security Holders................Not Applicable
8. Plan of Distribution....................Front Cover Page; Plan of
Distribution
9. Description of the Securities...........Description of Securities
10. Interest of Named Experts and
Counsel ................................Not Applicable
11(a). Description of Business ................Description of Business
11(b). Description of Property ................Management - Facilities
11(c). Legal Proceedings .....................Legal Matters
11(d). Market for Common Equity and
Related Stockholder Matters ............Front Cover Page; Risk Factors;
Shares Eligible For Future Sale
11(e)(f)(g). Financial Statements .............Financial Statements
<PAGE>
11(h). Management's Discussion and
Analysis or Plan of Operation.......... Plan of Operations
11(i). Changes In and Disagreements
with Accountants on Accounting
and Financial Disclosure ..............Change in Independent Accountants
11(j). Directors, Executive Officers,
Promoters and Control Persons .........Directors, Executive Officers,
Promoters and Control Persons
11(k). Executive Compensation ................Executive Compensation
11(l). Security Ownership of Certain
Beneficial Owners and Management ..... Security Ownership of Certain
Beneficial Owners and Management
11(m). Certain Relationships and
Related Transactions ..................Related Transactions
12. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities ............Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities
<PAGE>
The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated July 23, 1999
PROSPECTUS
R-Tec Technologies, Inc.
3,750,000 Shares Common Stock
$8.00 per share
-------------
R-Tec owns patented paints The proceeds of stock sales will
and other coating technologies be held in escrow by the Bank of
which detect leaks from freon New York and paid to R-Tec only if:
and other gases by changing
color. We intend to sell the at least 625,000 shares are sold,
paints and to develop new within three (3) months after the
products to detect other effective date of this prospectus
types of gas leaks. or six months after the effective
date of the prospectus, if
This is our initial public extended by R-Tec.
offering. There is currently
no public market for the common Otherwise all subscriptions will
stock. be returned to you with interest.
All of the shares to be sold
in the offering are being sold
by officers and directors of R-Tec
on a "best efforts" basis. We may
sell some units through qualified
selling agents.
The Offering
Possible
Public Price Commissions Total to R-Tec
Per Share..................$ 8.00 $ .80 $ 7.20
Proceeds to R-Tec from
Minimum Offering.........$ 5,000,000.00 $ 500,000.00 $ 4,500,000.00
Proceeds to R-Tec from
Maximum Offering.........$30,000,000.00 $3,000,000.00 $27,000,000.00
This investment involves a high degree of risk. You should purchase shares only
if you can afford a complete loss. See "Risk Factors" beginning on page 5 for
specific risks involved in this offering.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is July __, 1999
<PAGE>
Table of Contents
Prospectus Summary............................................................3
Risks Factors ................................................................5
Recent Developments...........................................................7
Where You Can Find
Additional Information.....................................................7
Dilution .....................................................................8
Use of Proceeds...............................................................9
Selected Financial Data .....................................................12
Management's Discussion and
Analysis or Plan of Operation.............................................12
Business.....................................................................13
Management and Affiliates....................................................19
Principal Shareholders ......................................................24
Certain Relationships and
Related Transactions......................................................24
Description of Securities....................................................25
Plan of Distribution ........................................................26
Legal Matters................................................................28
Experts......................................................................28
Change in Independent Accountants............................................28
How to Invest in R-Tec.......................................................29
Financial Statements........................................................F-1
2
<PAGE>
Prospectus Summary
This summary highlights information contained elsewhere in this
prospectus. You should read the entire prospectus carefully, including the "Risk
Factors" section and the financial statements and the notes to those statements.
R-Tec Technologies, Inc.
R-Tec Technologies, Inc. was formed in October, 1998 for the purpose of
developing, manufacturing, selling and licensing our proprietary technology for
detecting gas leaks. R-Tec has not yet commenced commercial operations. We
presently do not own our own facilities to produce our products, although we
have a contract with a manufacturer, Anscott Chemical Corp. We do not have
commercial quantities of our products. The efficacy of our product, R-Tect 22,
has been confirmed by an independent third-party, Motors & Armatures Corp. which
tested the product and its formulations and found that they meet Motors &
Armatures' standards for commercial leak testing of critical charge
refrigeration and air conditioning systems. Motors & Armatures' standards for
leak testing might not be the same as testing standards used by other
third-parties and potential customers. To date, R-Tec has devoted all of its
energies to its initial organization, product research and development,
developing a business plan, fund raising efforts and to primarily preparing the
documentation related to this offering.
R-Tec's proprietary technology is protected by a patent which is owned by
R-Tec. The patent was purchased with a note payable in the amount of $850,000.
The patent is collateral for the note.
We have developed three gas detecting paints. The paints change color when
gas escapes through the coated junction allowing for rapid detection of gas
leaks. We believe our existing products have broad application in areas such as
the manufacture and installation of air conditioning and refrigeration systems.
We plan to use these technologies to develop more gas detecting paints and
other products that will be used in a variety of industrial and manufacturing
settings to coat pipe junctions. Examples of such products are a carbon dioxide
reactive paint product which exists in prototype form, designed to detect carbon
dioxide leaks, a natural gas detection reactive paint which exists in prototype
form and a propane leak detection reactive paint product which has not been
developed. In addition to the propane leak detection reactive paint product, we
hope to develop leak detection systems for other gases, such as ammonia, butane,
using our patented technology. R-Tec's detection technology potentially could be
used to measure blood gases, to measure the freshness of packaged poultry, and
to detect gas leaks in electrical transformers. At present, we have not taken
steps to determine feasibility of other potential applications of our
technology. Sale of the minimum number of shares offered would reduce the number
of products which R-Tec can develop and produce.
3
<PAGE>
The Offering
Common Stock Offered............Minimum - 625,000 shares
Maximum - 3,750,000 shares
Offering Price..................$8.00 per share
Total Number of
Shares Outstanding
After the Offering
(assuming all offered
shares are sold)................18,750,000 shares
Total Number of
Shares Outstanding
After the Offering
(assuming the minimum
number of shares offered
are sold).......................15,625,000 shares
Estimated Net Proceeds
(assuming the minimum
number of shares offered
are sold).......................$4,000,000
Estimated Net Proceeds
(assuming all offered
shares are sold)................$26,500,000
Use of Proceeds.................We intend to use the net proceeds of this
offering to
o conduct product research and development
o fund initial business operations
o pay salaries
o develop production and marketing plans
o pay for the patent assigned to R-Tec
o provide working capital and for general
corporate purposes.
Dividend Policy..................We do not intend to pay any cash dividends for
the foreseeable future.
4
<PAGE>
Risk Factors
Investing in our common stock involves a high degree of risk. In addition
to the other information in this document, you should carefully consider the
following risk factors in evaluating an investment in our common stock.
If We Sell Only 625,000 Shares, You Might Lose Your Entire Investment Due To Our
Cash Shortage.
If only 625,000 shares are sold, R-Tec may not have sufficient
capital to fund operations past 24 months, without revenues. In addition, R-Tec
may be unable to find additional suitable financing sources on acceptable terms.
Therefore, if the minimum number of shares are sold, R-Tec may not have
sufficient funds to operate after 24 months and we may not be able to undertake
additional projects or operations described in this prospectus. This could
result in your losing all of your investment.
R-Tec Is A Start-Up Company With Limited Operating History.
There is absolutely no assurance that we will be able, upon
completion of this offering, to successfully implement our proposed business
plan or that R-Tec will ever operate profitably. R-Tec was only recently
incorporated, has no significant assets other than a patent. R-Tec has no
current substantial business operations nor any history of operations and is
considered to be a development stage enterprise.
All Of Our Products Are New And May Not Be Commercially Feasible.
R-Tec may also experience difficulties that could delay or prevent
the development, introduction and marketing of its products. R-Tec will be
dependent upon products that will be developed in commercial quantities in the
future. If we are unable on a timely basis to develop new products or
enhancements to existing products, or if our products do not achieve market
acceptance or commercial success, our business, operational results and
financial condition will be materially adversely affected and investors could
lose their entire investment. Since our products have never been produced in
commercial quantities, there can be no assurance that commercial production will
be feasible. Even if feasible, there can be no assurance that our products will
perform as intended.
If Our Products Fail To Operate Properly, We Will Be Subject To Significant
Liability.
Our products are designed to avoid significant dangers, such as
natural gas leaks. If our products do not function properly and property or
personal injury occurs as a result of gas leaks which should have been detected
by our products, R-Tec may incur significant liability which R-Tec may be unable
to pay.
We Do Not Have Our Own Production Facilities At This Time To Produce Our
Products And Our Office Space Is Inadequate For Future Needs.
At the present time we do not have our own facility to produce the
paints which are our principal products. In addition, our present office space
is inadequate for future needs.
Shareholders May Be Unable To Sell Stock Since There Is No Active Market At
Present.
No public market exists for R-Tec's common stock. You may not be
able to sell your shares promptly or at all, or sell your shares at a price
equal to or above the price you paid for the shares due to the lack of an active
market at present. There can be no assurance that any market will develop for
the securities or that if a market does develop, that it will continue. If we
are unable to qualify for the NASDAQ Small Cap Market listing, we believe that
our stock will trade on over-the-counter market on the OTC Bulletin Board.
Consequently, selling your common stock would be more difficult, transactions
could be delayed, and security analysts' and news media's coverage of R-Tec may
be reduced. These factors could result in lower stock prices.
5
<PAGE>
R-Tec's Business Is Dependent On Patent Protection Which Cannot Be Assured.
R-Tec holds a patent on its technology. There can be no assurance that
patent, trade secret or copyright laws will protect our technologies or that we
will not be vulnerable to competitors who attempt to copy or use our products or
processes.
There Is A Risk That Our Products Will Not Work As Intended.
We have never produced any commercial quantities of our products and they
have never been tested by consumers. There is no assurance that our products
will work for consumers as intended and no assurance can be given that our
products will not cause damage which will result in liability for R-Tec. If our
products are not commercially viable, we could have insufficient funds to
operate which could result in our terminating operations.
Management Has Broad Discretion In The Use of Proceeds Of This Offering.
Management has broad discretion in the use of proceeds and the allocations
set forth are only estimates, subject to adjustment in the opinion of management
based on events which may arise in the future.
Present Stockholders Will Derive Greater Benefits If We Are Successful And Have
Less Risk.
Present stockholders will benefit from a disproportionately greater share
of R-Tec, if successful, while investors in this offering risk a disproportional
greater loss of cash invested if R-Tec is not successful. Three of our officers
and directors collectively have given total consideration of $540,000 for the
15,000,000 presently outstanding shares of R-Tec's common stock. Investors in
this offering will pay a total purchase price of $30,000,000, assuming all
3,750,000 shares are sold. The officers and directors will own 80% of the
outstanding shares and investors in this offering will own 20% of the
outstanding shares.
Some Of R-Tec's Competitors May Be Larger And Better Financed.
R-Tec's products will compete with electronic and other devices which are
designed to detect gas leaks. Some of these competitors have greater financial,
marketing and manufacturing resources. This, together with the limited capital
available to R-Tec which will limit its marketing efforts, creates a significant
competitive disadvantage. If we are not able to compete successfully, regardless
of the quality of our products and the success of this offering, we will have
little chance of succeeding and it is likely investors will lose their entire
investment.
Since R-Tec Has No Underwriter There Is A Greater Risk That No Market Will
Develop For Our Stock.
Lack of an underwriter or broker/dealer participation in the offering is
likely to increase the risk that no market for our securities will develop upon
completion of the offering. Because R-Tec has not engaged the services of an
underwriter, the independent due diligence review of R-Tec, its affairs and
financial condition, which would ordinarily be performed by an underwriter, have
not been performed.
If R-Tec's Common Stock Becomes Subject To The Penny Stock Rules, Investors May
Find It More Difficult To Sell Their Securities.
If the trading price, if any, of the common stock were to fall below $5.00
per share, trading in the common stock would be subject to rules promulgated
under the Exchange Act of 1934. This could severely limit the liquidity of the
common stock and the ability of investors in this offering to sell the common
stock in the secondary market. Those rules require additional disclosure by
broker-dealers in connection with any trades involving a stock market price of
less than $5.00 per share. These rules require the delivery of a disclosure
schedule explaining the penny stock market and the risks associated therewith.
Delivery must occur prior to any transaction. Additional sales practice
requirements are imposed on broker-dealers who sell penny stocks to persons
other than established customers and accredited investors. For these types of
transactions, the broker-dealer must make a special suitability determination
for the investor and must have received the investor's written consent to the
transaction prior to sale. The broker-dealer also must disclose the commissions
payable to the broker-dealer, and current bid and offer quotations for the penny
stock. If the broker-dealer is the sole market-maker, the broker-dealer must
disclose this fact and the broker-dealer's presumed control over the market.
This information must be provided to the customer orally or in writing prior to
effecting the transaction
6
<PAGE>
and in writing before or with the customer confirmation. Monthly statements must
be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks. The additional
burdens imposed upon broker-dealers by these requirements may discourage them
from effecting transactions in the common stock.
We May Be Unable To Sell Stock In Some States Due To The Inability To Comply
With Blue Sky Regulations.
Since R-Tec is not using an underwriter, we must register our
officers and directors in some states in which we seek to sell our common stock.
There can be no assurance that any or all stock registrations in various states
will be approved. If registration is not approved, it will be more difficult for
us to sell the minimum number of shares.
Our Offering Price Has Been Arbitrarily Determined.
We have unilaterally and arbitrarily determined the offering price.
The value of the common stock as determined by any subsequent market for the
common stock may be may much less than the price paid by you.
Recent Developments
On February 24, 1999, a press release was issued by R-Tec for
distribution on the Internet which contained several inaccurate statements or
statements which require clarification. The press release stated inaccurately
that R-Tec obtained worldwide recognition with its global patent which was filed
in 104 countries. In fact, the recognition referred to was R-Tec's patent
application which was filed in 96 countries. The press release statement that
R-Tec's products were "revolutionary" and its technology instrumental in
reducing CFC emissions and global warming were based on the opinions of Shawn P.
Walsh, a consultant to R-Tec and a director. However, R-Tec's products are not
yet in consumer use and have never been instrumental in reducing CFC emissions
or global warming. The press release also stated inaccurately that Underwriters
Laboratories were unable to produce a standard for R-Tec's technology because it
is so advanced. In fact, Underwriters Laboratories stated that it did not have a
published standard with which to evaluate R-Tec's R-Tect 22 product due to the
uniqueness of this product. Finally, the reference in the press release to a
contact by Deputy Commissioner of New York City Environmental Protection Agency
failed to indicate that his evaluation of R-Tec's products was based on
statements made to him by R-Tec concerning the product's performance and
efficacy.
Where You Can Find Additional Information
In connection with the offering of the common stock, R-Tec has filed
a registration statement with the Securities and Exchange Commission. There is
additional information concerning R-Tec contained in the registration statement
that is not contained in this prospectus. In addition, beginning with the
effective date of this prospectus, we will be required to file annual quarterly
and special reports and proxy statements with the SEC. You may read and copy any
document we file at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or may view them on the SEC worldwide web site at
(dhttp://www.sec.gov\edgar). Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the Public Reference Room. You may request a
copy of our SEC filings, at no cost, by writing R-Tec Technologies, Inc., 61
Mallard Drive, P.O. Box 282, Allamuchy, New Jersey 07820.
7
<PAGE>
Dilution
As of March 31, 1999, R-Tec's common stock had a deficit in net
tangible book value of $(852,437) or approximately $(.057) per share. The
following table sets forth the difference between the price to be paid by new
shareholders and the negative net tangible book value per share at March 31,
1999, as adjusted to give effect to this offering.
<TABLE>
<CAPTION>
3,750,000 shares 2,500,000 shares 1,250,000 shares 625,000 shares
sold sold sold sold
<S> <C> <C> <C> <C>
Assuming a public offering price of $8.00 $8.00 $8.00 $8.00
Net proceeds to R-Tec $26,500,000 $17,500,000 $8,500,000 $4,000,000
Net tangible book deficit per share for existing
shareholders before offering
$(0.057) $(0.057) $(0.057) $(0.057)
Increase per share attributable to payment of
shares purchased by new investors
$1.42 $1.01 $0.53 $0.26
Pro forma net tangible book value after offering $1.37 $.95 $0.47 $0.20
Dilution per share to new investors $6.63 $7.05 $7.53 $7.80
</TABLE>
The following chart illustrates the pro-forma proportionate
ownership in R-Tec, upon completion of the offering of present stockholders and
of investors in this offering, compared to the relative amounts paid and
contributed to capital of R-Tec by present stockholders and by investors in this
offering, assuming no changes in net tangible book value other than those
resulting from the offering.
<TABLE>
<CAPTION>
Shares Issued Total Consideration Average Price
Number Percent Amount Percent Per Share
<S> <C> <C> <C> <C> <C>
Present Stockholders 15,000,000 80% $ 540,000 1.77% $ 0.04
New Investors Maximum 3,750,000 20% $30,000,000 98.23% $ 8.00
Present Stockholders 15,000,000 96% $ 540,000 9.75% $ 0.04
New Investors Minimum 625,000 4% $ 5,000,000 90.25% $ 8.00
</TABLE>
8
<PAGE>
Use of Proceeds
The net proceeds to R-Tec from the sale of all of the common stock
offered are estimated to be $26,500,000 if the maximum is sold, after deducting:
o Estimated offering expenses of $500,000.00 for legal, accounting, printing and
advertising in connection with the offering, and
o Possible commissions to qualified selling agents of 10% of sales attributed to
them. The common stock will be primarily offered and sold by R-Tec through its
officers and directors, who will not be compensated for their sales efforts. To
the extent shares are
sold by officers and directors of R-Tec, funds now allocated for commissions
will be used for research and development.
The proceeds of this offering will be used to pay:
o Research and development expenses, which consist of the salaries of our
scientists, the cost of equipment, supplies, leasing laboratory space and
purchase or construction of a laboratory.
o Office expenses which consist of expenses for executive offices, purchase or
construction of a building, and lease of warehouse space.
o Parts and supplies expenses which consist of the cost of raw materials and
inventory.
o Salary expenses, which consist of the salaries of R-Tec's officers and
directors, internal accounting, administrative and other personnel.
o Sales and marketing expenses, which consists of advertising and public
relations costs.
o Patent expenses, which consists of the payment due for the patent.
o Insurance expense consists of the cost of general liability, officers and
directors liability, life, health, workers' unemployment compensation and
automobile insurance.
The chart below represents the use of proceeds if the maximum number of
shares offered is sold. Sale of all the shares offered would provide sufficient
funds for R-Tec to operate 48-60 months without revenue.
ESTIMATED
PERCENT OF
AMOUNT PROCEEDS
Research and Development Activities $ 7,011,080 26.46%
Salary Expense 5,485,000 20.70%
Parts and Supplies Expense 3,700,000 13.96%
Office Expense 6,253,920 23.60%
Sales and Marketing Expense 2,000,000 7.55%
Patent Cost 850,000 3.21%
Travel Expense 500,000 1.89%
Insurance Expense 700,000 2.64%
------- -----
TOTAL $26,500,000 100%
Offering Expenses 500,000
Possible Commissions 3,000,000
The chart below represents the use of proceeds if $20,000,000.00 of common
stock is sold. Sale of 2,500,000 of the shares offered would provide sufficient
funds for R-Tec to operate 36 to 48 months without revenue.
9
<PAGE>
ESTIMATED
PERCENT OF
PURPOSE AMOUNT PROCEEDS
Research and Development Activities $ 4,986,080 28.49%
Salary Expense 4,485,000 25.63%
Parts and Supplies Expense 1,800,000 10.29%
Office Expense 3,653,920 20.88%
Patent Cost 850,000 4.86%
Sales and Marketing Expense 1,000,000 5.71%
Travel Expense 200,000 1.14%
Insurance Expense 525,000 3.00%
------- -----
TOTAL $17,500,000 100%
Offering Expenses 500,000
Possible Commissions 2,000,000
The chart below represents the use of proceeds if $10,000,000 of common
stock is sold. Sale of 1,250,000 of the shares offered would provide sufficient
funds for R-Tec to operate 24 to 36 months without revenue.
ESTIMATED
PERCENT OF
PURPOSE AMOUNT PROCEEDS
Research and Development Activities $ 1,161,080 13.66%
Salary Expense 2,885,000 33.94%
Parts and Supplies Expense 800,000 9.41%
Office Expense 1,853,920 21.81%
Patent Cost 850,000 10.00%
Sales and Marketing Expense 500,000 5.88%
Travel Expense 100,000 1.18%
Insurance Expense 350,0000 4.12%
-------- -----
TOTAL $ 8,500,000 100%
Offering Expenses 500,000
Possible Commissions 1,000,000
The chart below represents the use of proceeds if the minimum number of
shares offered are sold. In the event the minimum number of shares offered were
sold, Mr. Scola, Mr. Lacqua and Ms. Vitolo would defer a portion of their
salaries until sufficient funds were available. Sale of the minimum number of
shares offered would provide sufficient funds for R-Tec to operate 24 months
without revenue.
10
<PAGE>
ESTIMATED
PERCENT OF
PURPOSE AMOUNT PROCEEDS
Research and Development Activities $ 684,920 17.12%
Salaries Expense 1,485,000 37.13%
Parts and Supplies Expense 226,160 5.56%
Office Expense 353,920 8.85%
Sales and Marketing Expense 200,000 5.00%
Patent Cost 850,000 21.25%
Travel Expense 50,000 1.25%
Insurance Expense 150,000 3.75%
------- -----
TOTAL $ 4,000,000 100%
Offering Expenses 500,000
Possible Commissions 500,000
The foregoing represents management's current estimate of how the proceeds
of this offering will be used and is
subject to change based on changing circumstances and differing needs of R-Tec
as they may exist in the future. R-Tec may reallocate the proceeds in the above
described categories or to other purposes in response to changes in its plans,
industry conditions, and R-Tec's future revenues and expenditures.
We believe that the net proceeds from the sale of the common stock
offered assuming that all shares offered are sold, will provide R-Tec sufficient
capital to fund initial operations, development and expansion of business for
approximately the first 48 to 60 months following completion of this offering.
If only the minimum is sold, R-Tec believes it will be able to operate for 24
months if no revenue is generated from its operations. Many factors may affect
R-Tec's cash needs, including the possible failure to develop sufficient
revenues from the sale of its products. R-Tec may not have sufficient capital
for its funding requirements and may be unable to find suitable financing on
acceptable terms. If R-Tec is unable to obtain such additional financing, our
ability to maintain our level of operations could be materially adversely
affected and R-Tec may not succeed. This event would significantly increase the
risk of loss to those persons who invest in this offering.
A portion of the proceeds will be used to pay a promissory note
executed in payment for the patent which underlies our patented technology.
Under the terms of this note $850,000 is payable within 30 days of completion of
this offering. The note bears interest at the rate of 6% per annum.
Any portion of the net proceeds not required for immediate
expenditure will be deposited in R-Tec's corporate checking account,
interest-bearing accounts or invested in short-term government notes, treasury
bills, or short-term obligations of financial institutions.
We reserve the right to change the use of proceeds in the event that
we determine based on our marketing efforts and research and testing of our
products that an adjustment in the proceeds of this offering is warranted in the
opinion of management. However, there will be no adjustment in any amounts
utilized to pay promissory note and patent expense.
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Selected Financial Data
R-Tec is a development stage company and has no revenues or earnings
from operations.
March 31, 1999 December 31, 1998
(unaudited)
Total Assets $1,031,863 $904,500
Total Liabilities 885,336 821,147
Stockholders Equity 146,527 83,353
Net Tangible Book Value (852,437) (776,647)
Net Tangible Book Value per share $ (0.057) $(0.052)
Management's Discussion and Analysis or Plan of Operation
The following discussion and analysis should be read in conjunction with
R-Tec's financial statements and the Notes associated with them contained
elsewhere in this prospectus. This prospectus contains forward-looking
statements that involve risks and uncertainties. R-Tec's actual results may
differ significantly from the result discussed in the forward looking
statements. Factors that might cause such a difference are discussed in "Risk
Factors."
Overview
R-Tec has patented technology for coatings such as paint and other
products which may be used to detect leaks of various gases from
pipes. We believe that our R-Tect 12 reactive paint, R-Tect 22 reactive paint
and R-Tect carbon dioxide reactive paint products are ready for commercial
production and we have an order for R-Tect 22 reactive paint.
From its inception in 1998, R-Tec has been engaged primarily in
activities devoted towards obtaining the patent rights to the technology,
general business operations, negotiating license agreements and obtaining
financing for this offering. There have been no revenues to date.
Results of Operations
It is difficult for R-Tec to forecast its revenue or earnings
accurately. We believe that period-to-period comparisons of our operating
results may not be meaningful.
As a result of our extremely limited operating history, we do not
have historical financial data for a significant number of periods on which to
base planned operating expenses. Our expense levels are based upon our
expectations concerning future revenue. Thus, quarterly revenue and results of
operation are difficult to project.
Liquidity and Capital Resources
R-Tec has incurred negative cash flows from operation since its inception.
We expect to continue to expend substantial sums to complete product
development, to create inventory and to begin marketing and sales. Our future
capital requirements and the adequacy of available funds will depend on numerous
factors, including the successful commercialization of the R-Tect 22, R-Tect 12
and R-Tect carbon dioxide reactive paint products, progress in its product
development efforts, the magnitude and scope of such efforts, the cost of
contract manufacturing, cost of filing, prosecuting, defending and enforcing
patent claims and other intellectual property rights, competing technological
and market developments, and the development of strategic alliances for the
development and marketing of our products. R-Tec requires the minimum proceeds
of this offering to meet its planned operating requirements through June 30,
2001. In the event R-Tec's plans change or its assumptions change or prove to be
inaccurate or the proceeds of the offering prove to be insufficient to fund
operations at the planned level (due to further unanticipated expenses, delays,
problems or otherwise), R-Tec could be required to obtain additional funds in
any event through equity or debt financing, strategic alliances with corporate
partners and others, or through other sources in order to bring its products
through regulatory approval to commercialization. The terms and prices of any
equity or debt financings may be significantly more favorable than those of the
shares sold in the offering.
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R-Tec does not have any material committed sources of additional financing, and
there can be no assurance that additional funding, if necessary, will be
available on acceptable terms, if at all. If adequate funds are not available,
we may be required to further delay, scale-back, or eliminate certain aspects of
our operations or attempt to obtain funds through arrangements with
collaborative partners or others that may require us to relinquish rights to
certain of our technologies, product candidates, products, or potential markets.
If adequate funds are not available, R-Tec's business, financial condition, and
results of operations will be materially and adversely affected.
The actual research and development and related activities of R-Tec
may vary significantly from current plans depending on numerous factors,
including changes in the costs of such activities from current estimates, the
results of R-Tec's research and development programs, the results of clinical
studies, the timing of regulatory submissions, technological advances,
determinations as to commercial potential, the status of competitive products.
The focus and direction of R-Tec's operations will also be dependent upon the
establishment of collaborative arrangements with other companies, and other
factors.
Until required for operations, R-Tec's policy is to invest its cash
reserves in bank deposits, certificates of deposit, commercial paper, corporate
notes, U.S. government instruments and other investment-grade quality
instruments.
There can be no assurance that R-Tec will be able to commercialize
its technologies, or that profitability will ever be achieved. R-Tec expects
that its operating results will fluctuate significantly from quarter to quarter
in the future and will depend on a number of factors, most of which are outside
R-Tec's control.
Business
History of Our Company
R-Tec, was recently incorporated under the laws of the State of New Jersey
on October 22, 1998. R-Tec has no significant assets with the exception of its
patent. To date, activities have been limited to organizational matters, product
research, developing a corporate business plan, patent filings, negotiating
license agreements and the preparation and filing of the registration statement
of which this prospectus is a part.
Background
Presently, there are three major methods used to detect gas freon leaks.
The oldest method is to coat suspected leak sites with a liquid, such as soap
bubbles. Pressure from the escaping gas causes bubbles to form which confirms a
leak at the site. Although inexpensive and generally applicable, this method
lacks the ability to locate small leaks which over time can allow large volumes
of gas to escape. The second major method is the use of electronic ionization
detectors. Although more expensive than the pressure based detection method,
false results have been noted due to interaction with metallic pipes. Moreover,
their effectiveness diminishes with the amount of escaping gas. As a result,
such detectors have a limited ability to find small leaks. The third, and
perhaps most effective currently available detection method is the internal
injection of liquid based dyes. The dye leaks through the opening and can be
seen on the outside of the pipe. This method necessitates purchasing expensive
equipment, hiring trained technicians, and purchasing costly dyes for each
application. Recently, some hardware manufacturers have declared due to the
invasive nature of these dyes, that their use may void the manufacturer's
warranty. Our products are designed as an external coating which is
non-corrosive and will not interfere with the operation of the pipe or equipment
and we believe the manufacturer's warranties will not be affected. Moreover,
none of the competitive methods provide any form of passive leak detection.
The benefits that would result from early detection of leaks in gas lines
may be substantial. By specifically identifying the source of a gas leak and
permitting the early detection of the escaping gas, our products may reduce
environmental damage caused by leaks of gases, which are believed to cause ozone
depletion and other environmental problems. In addition, by specifically
indicating the location of a leak, our products may enable owners or operators
to promptly and cost effectively repair the leak and reduce the gas replacement
cost incurred as a result of leakage.
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Our Proposed Business
R-Tec was formed to develop and manufacture reactive paints and other
products to coat pipe junctions. Once sealed with the paint, gas escaping
through the painted junction causes a chemical reaction resulting in a visible
color change of the paint.
For example, during the manufacture and installation of air conditioning
and refrigeration systems, the manufacturer or installer may apply R-Tect 22
externally to the joints of the system. When a leak occurs at a coated joint,
the blue paint changes to a bright florescent yellow, identifying a leak from
the inside out. R-Tect 22 does not react with gases in the air surrounding the
pipe. Thus, the exact location of the leak is identified. R-Tect 22 not only
detects gas leaks from a system, but also we believe, based on the tests we have
performed, neutralizes limited amounts of some of the chloroflurocarbons passing
through the paint by removing the chlorine and fluoride from the gas, making the
gas inert and possibly harmless to the ozone layer. Freon gas is trapped in our
paint as it escapes from the leaking pipe. A chemical which reacts with the
freon causes it to change its structure through a polymer which traps the
chemical and prevents the release of harmful gases into the air.
In addition, R-Tect 22 may react to the leak before significant refrigerant
gas escapes from the system and the owner of the equipment experiences any
failure or need to replace the gas, thereby reducing the need for further
production of chloroflurocarbons. Although there are calls for reducing the
amount of chloroflurocarbon production, due to the overwhelming use of this
product worldwide, these gases will be produced overseas and domestically until
the year 2040.
The first products we plan to make available for sale are:
o R-Tect 22 reactive paint. R-Tect 22 is an external application paint designed
to detect R-22 freon gas leaks in air conditioning
units,
o R-Tect 12 reactive paint, developed for automotive application to detect R-12
freon gas,
o R-Tect carbon dioxide reactive paint developed as an external application
paint designed to detect carbon dioxide leaks in pipe systems which contain
gaseous or liquid carbon dioxide, and
o R-Tect Natural Gas reactive paint developed as an external application paint
which is designed to detect natural gas leaks in a variety of systems.
Other products nearing the end of development are R-Tect 134A reactive
paint, developed to detect R-134A, a gas in air conditioning applications. We
expect R-Tect natural gas reactive paint, R-Tect carbon dioxide reactive paint
and R-Tect 22 reactive paint to be available for commercial production in
October 1999. R-Tect 12 reactive paint should be available in November 1999,
along with R-Tect 134A reactive paint. However, no assurance can be given that
commercial production will, in fact, occur on this timetable.
Two-Phase Business Plan
Our business plan is based on implementing our strategy in two
phases:
o Phase 1 - Establish Manufacturing and Distribution Relationships and
Begin Distribution of Three Initial Products, and
o Phase 2 - Expand Product Lines.
The key elements of each phase of our strategy are described below:
Phase 1 - Establish Manufacturing and Distribution Relationships and
Begin Distribution of the Three Initial Products
R-Tec's primary strategic goals for Phase 1 are:
o The selection of appropriate manufacturing and distribution partners; and
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o The commencement of commercial distribution of our reactive paint products:
o R-Tect 22 freon leak detecting coating. Development of this product is
complete.
o R-Tect 12 freon leak detecting coating. Development of this product is
complete.
o R-Tect carbon reactive paint. Development of this product is expected to
be complete by October, 1999 at an additional cost of $50,000.
During Phase 1, we will incur significant operating expenses.
$850,000 due for patent acquisition will also be payable during this period. We
do not expect to generate significant operating revenues for a period of at
least six months after the completion of this offering.
During Phase 1 R-Tec will require manufacturing facilities, office space
and warehouse space. These facilities may be purchased or leased.
Manufacturing and Distribution Relationships.
One of R-Tec's Phase 1 goals is to establish beneficial relationships with
strategic manufacturing and distribution partners. With this strategy, we hope
to eliminate the need to build a large and costly production and sales
infrastructure and to benefit from the inclusion of our products in our
partners' marketing efforts.
R-Tec has entered into a manufacturing contract with Anscott Chemical
Industries, Inc., a nationally recognized manufacturer of chemical products
located in Wayne, New Jersey.
Anscott will be the exclusive manufacturer of our leak detection products;
R-Tect 12, R-Tect 22, and R-Tect carbon dioxide reactive paints. The agreement
is for five years. The rights granted to Anscott under the agreement are limited
to these three specified products and to the United States. Anscott's
exclusivity rights with respect to R-Tect carbon dioxide reactive paint is
further limited to the dry cleaning industry. Anscott will manufacture our
products based on purchase orders received from R-Tec. R-Tec intends to locate a
quality control technician employed by us at Anscott's offices, but there is no
provision in our contract with Anscott which requires Anscott to accept such
supervision.
We reached an oral distribution agreement with Motors & Armatures in June,
1997. Motors & Armatures is believed to be one of the largest distributors of
air conditioning, refrigeration, and heating parts and supplies to wholesalers
and original equipment manufacturing accounts in the U.S. It sells primarily to
North America.
Motors & Armatures has placed an initial order for 5,000 kits of R-Tect 22
reactive paint at $44.00 per kit. We believe that Motors & Armatures will
distribute R-Tect kits (R-Tect 12, R-Tect 22, and later R-Tect 134A) reactive
paints, primarily to organizations that will in turn sell them to air
conditioning or refrigeration contractors. We expect to deliver R-Tect 22 to
Motors & Armatures by October 31, 1999. Motors & Armatures has advised us that
it intends to create artwork for our products which it will be distributing and
intends to hire an exclusive representative to work on the R-Tect product line.
This specialist will travel with Motors & Armatures' sales representatives to
train and educate its clients in the use of our products. Motors & Armatures has
orally represented to us that it has allocated $156,000 for advertising in the
first year for R-Tec's products and that it will also provide a direct mail
campaign to reinforce the advertising program.
Motors & Armatures has proposed a six month test marketing program to
determine the volume level of sales. It intends to promote R-Tec's products as
both, leak detectors, and as preventative maintenance products.
R-Tec's Efforts To Expand Commercial Use of Initial Products.
During Phase 1 R-Tec also intends to pursue direct sales to end-users and
the original equipment manufacturing market. We will also complete research and
development of our remaining initial products and will pursue marketing of these
products. Potential users include public utility companies, automotive, marine,
aviation, aerospace companies, and commercial real estate owners and developers.
We have met with one utility company, Brooklyn Union Gas Utility. No sales have
resulted from that meeting. Other utility companies have expressed an interest
in the product. We plan to meet with Public Service Electric & Gas
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and Con Edison Public Utilities. We have also identified government agencies and
municipalities where our products can reduce maintenance, overhead and provide
another means to detect harmful gases. We also intend to pursue licensing
arrangements with select end-users.
We believe a marketing opportunity will also develop from insurance
companies that underwrite risk associated with gas explosions. R-Tec will
introduce its products to these insurance companies and will attempt to persuade
them either to mandate the use of R-Tec's reactive paint products or to provide
financial incentives, such as discounted insurance rates, to companies that
utilize R-Tec's detection products.
We believe that a marketing opportunity will develop for the use of R-Tec's
reactive paint products to detect natural gas and propane leaks. Specifically,
during the installation of a gas pipe, the installer could apply our paint to
pipe joints. Property owners could also apply our reactive paint to pipe joints
in existing structures. If natural gas or propane leaks through a stress crack,
the paint is designed to change colors, indicating a leak, and warning anyone
who examines the pipe joint.
We also believe a market may exist for our reactive paint products in
chemical plants. Chemical plants utilizing our reactive paint products could
reduce the chance of significant damage caused by a toxic chemical or gas leak
by applying our products to pipe joints in their manufacturing facilities.
We also believe our reactive paint products could be used in the aerospace
and aviation markets. We believe that aircraft utilizing our reactive paint
products could possibly avert disasters caused by gas and fluid leaks if, during
a routine inspection, a mechanic notes a change in color of the paints applied
to pipe joints aboard the aircraft. Should there be a leak, it could be detected
and repaired prior to the aircraft taking off.
It is possible, though unlikely, that our paint could be caused to change
color due to exposure to some other substances or gas from another source. A
false positive reading due to ambient gases is minimized by the use of a clear
polymer coating, which encases each of the R-Tec paints. When properly applied,
the paint's impermeable coating serves to ensure that only gas leaking from the
protected source can contact the reactive paint and therefore cause a positive
reading. None of the testing conducted to date has indicated any variance of
responsiveness of R-Tec's products to geographic area or weather conditions,
such as humidity, air pressure or smog level.
Phase 2-Expand Product Lines and Expand Internal Sales
R-Tec anticipates that it will add product lines in Phase 2 which will be
marketed to the users identified in Phase 1. R-Tec will continue to pursue new
business with public utilities by developing new products which address specific
needs with the industry.
The speed with which we can develop, introduce, test market and expand
sales of the additions to the R-Tec product line will determine the timing of
the realization of our Phase 2 goals. This phase will be characterized by new
product introductions, test marketing, expanded sales efforts, and industry
driven mandates for the use of R-Tec products.
During Phase 2, in addition to manufacturing facilities, office space and
warehouse space required during Phase 1, R-Tec will require laboratory
facilities for product development.
During Phase 2, R-Tec will develop additional gas detection coating
products.
o R-Tect ethylene detector. The estimated development time is 90 days at
an approximate cost of $70,000.
o R-Tect propane reactive paint. The estimated development time is 90
days at a cost of approximately $100,000.
o R-Tect natural gas reactive paint. The estimated development time is
90 days at an estimated development cost of approximately $200,000.
o R-Tect SF6 detector. The estimated development time is 90 days at an
estimated development cost of approximately $200,000.
o R-Tect 134A, a freon detecting coating designed for the automotive,
air conditioning and refrigerator contractors market. The estimated
development time is 180 days at an approximate cost of $55,000.
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o R-Tect 410, a freon detecting coating designed for the residential and
commercial air conditioning and refrigerator contractors market. The
estimated development time is 180 days at an approximate cost of
$55,000.
In the event the minimum number of shares offered are sold, R-Tect 134A and
R-Tect 410 would not be developed from the proceeds of the offering.
Other Potential Applications Of R-Tec's Detection Technology.
Following the development of the products discussed above, R-Tec intends to
develop coatings which detect the following gases. The development time and cost
for each project has not been estimated by R-Tec. R-Tec's ability to develop
additional gas detection products will be dependent upon the proceeds from this
offering and the amount of funds available, if any, from operations.
Ammonia Chlorine Methane
Butane Ethane Methyl Mercaptan
Carbon Monoxide Isobutane Sulphur Hexaflouride
Acetylene Carbon Sulfide 2-Methylpropene
Acetyl Fluoride Carbon Tetrafluoride Nitric Oxide
Allene Hexafluoropropane Nitrogen
Arsine Hydrogen Nitrous Oxide
Boron Trichloride Hydrogen Chloride Other Refrigerants
Boron Trifluoride Isobutylene Phosgene
Bromotrifluoromethane Methyl Ether Propene
1,3-Butadiene Methanethiol Sulphur Dioxide
2-Methylpropane Trimthylamines
We also intend to research the feasibility of using a small strip across
the top of wrapped chicken parts and meat as a means of measuring freshness.
This fine lined strip would be the color green, indicating the chicken is fresh.
If this strip turns red, this would indicate that the chicken is diseased or
tainted with salmonella. This would alert both the retailer and the consumer to
the presence of a disease that might not have been detected without this safety
strip.
We intend to work with utility companies on the detection of SF6 gas. This
gas is used as an insulator in transformers and takes the place of harmful PCBs.
When these gases leak out of a transformer, they may cause the electricity
passing through the gas to spark and cause an explosion. Currently, the only way
the utility company can detect a leak is when the transformer explodes and it
must be replaced at great cost to utility companies and the consumer. R-Tec
proposes that when a transformer is assembled, the utility company place a strip
of our paint around the top of the transformer so that utility workers will be
able to easily detect a change in the color of a transformer hanging on a
utility pole, if a leak occurs.
Blood Gases
R-Tec believes there may be an interest in the use of our technology in the
field of blood gases. Blood travels from the heart to the lungs, liver, kidneys
and other major organs. During this trip it is carrying a percentage of oxygen,
carbon dioxide and certain other metabolic gases. However, when there is a
restriction in this flow, possibly due to coronary artery disease, the heart and
lungs are unable to supply the proper amount of oxygen to the blood. Therefore,
the oxygen level begins to decrease and the carbon dioxide level will increase.
R-Tec believes that by detecting gas on a molecular basis at the rate of
- -10 to the 64th power, the medical field may have the ability to detect a change
in the amount of carbon dioxide in the blood. This may help patients with a
family history or high risk of heart attacks or strokes to possibly know if they
have a serious medical condition. For example, a person might be able to rub
some gel on their wrist once a month. This gel would consist of a form of
R-Tec's product and dimethyl sulfoxide, a substance that carries medicine into
the body. If the blood flowing through the arterial arteries has a higher than
normal level of carbon dioxide, which is indicative of a restriction of blood
flow and oxygen, the gel would turn from one color to another, possibly
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warning the individual that they may be within weeks of suffering a stroke or
heart attack. This pre-warning system will allow a person to seek medical
attention and relieve the arterial restriction before suffering the damage
caused by a heart attack or stroke. Since smog does not affect a person's
arterial blood gas level because the level of these gases is maintained
internally, there is little likelihood of external factors affecting the
potential product. The feasibility of this potential product cannot be assured.
Los Alamos National Laboratory
Los Alamos National Laboratory, (developers of the atomic weapons program),
has requested a sample of our leak detection products. R-Tec intends to explore
the possibility of using its technology for the carbon dioxide experimental
facility at Los Alamos.
Employees
R-Tec currently has four full-time employees. Three full time employees are
officers and directors, and one is clerical. Additionally, R-Tec has retained
the services of the following on a part-time basis: two scientists, five
clerical, secretarial or accounting personnel and one consultant and director.
Upon successful completion of this offering, assuming all the shares are sold,
we plan to hire approximately 30 to 50 additional full-time employees. If the
minimum is sold, we expect to hire five additional employees, for a total of
nine full-time employees.
Facilities
R-Tec's executive offices are located at 61 Mallard Drive, P.O. Box 282,
Allamuchy, New Jersey 07820. Our rent is $2,000 per month under a lease which
expires on October 30, 2000. We also have an office and warehouse at 499 Van
Brunt Street, Suite 4B, Brooklyn, New York 11231. Our rent for that space is
$1,000 a month under a lease which expires on October 23, 1999.
Management believes that R-Tec's existing offices are unsuitable and
inadequate for their future needs. Upon the successful completion of this
offering, we plan to purchase or lease a building which will contain our
offices, warehouse, research and development laboratory, and manufacturing
operation at one location. We expect we will need a 50,000 to 75,000 square-foot
facility. If we purchased a building, the cost may be estimated to be between
$2.5 million and $3.75 million. If we leased such a facility, the expected
annual lease cost may be estimated at $125,000-$200,000.
Patent
R-Tec's gas detecting coating technology is the invention of Robert J
Verdicchio, Stewart R Kaiser, and Shawn Walsh. Their invention is protected by
U.S. patent #5783110, issued July 21, 1998, entitled, Composition for the
Detection of Electrophilic Gases and Methods of Use Thereof. The patent
describes a coating which detects gases, such as chlorodifluoromethane or carbon
dioxide, which are attracted to electrons. Upon contact with such gases, protons
are exchanged between the gas and the paint. The loss or gain of protons causes
a dye incorporated in the paint to change color, indicating the presence of gas.
On March 28, 1997, Mr. Verdicchio, Mr. Kaiser and Mr. Walsh assigned all of
their interest in the patent to Muriel Kaiser. On November 2, 1998 Muriel Kaiser
assigned all right, title and interest together with all rights of priority in
U.S. patent #5783110 to R-Tec. This assignment has been filed with the U.S.
Patent and Trademark Office.
On May 10, 1999, R-Tec executed a promissory note in favor of Muriel Kaiser
in the principal amount of $850,000 to pay for the transfer of the patent to
R-Tec. The note bears interest at the rate of 6% per annum is to be paid in full
within 30 days following the completion of this offering. By letter agreement
dated July 2, 1999, Mrs. Kaiser has agreed that in the event 625,000 shares are
not sold by January 10, 2000, payment will be made by R-Tec's execution of a
promissory note for $850,000 due and payable in equal quarterly payments over a
five-year period at 6% interest.
There can be no assurance that any of our future patent applications will
be granted, that any current or future patent or patent application will provide
significant protection for our products or technology, be of commercial benefit
or that the validity of such patents or patent applications will not be
challenged. Moreover, there can be no assurance that foreign patent, trade
secret or
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copyright laws will protect our technologies or that we will not be vulnerable
to competitors who attempt to copy or use our products or processes.
Patent Valuation
The patent has been appraised by Intellectual Property Valuators of
Sandown, South Africa. The appraiser concluded that the patent has a value of
$31,977,000.
Governmental Regulations And Industrial Standards
We believe based on the opinion of our consultant who is also a director,
that our products presently comply with any applicable material governmental
health and safety regulations and standards. However, there can be no assurance
that our products will comply with all applicable regulations and standards in
the future. Because the future scope of these and other regulations and
standards cannot be predicted, there can be no assurance that we will be able to
comply with all future regulations or industry standards.
Year 2000 Issues
We do not expect any Year 2000 issues to affect the development of our
products. All software used by R-Tec has been represented to be Year 2000
compliant by the vendor. Motors & Armatures has provided assurances that it is
Year 2000 compliant. R-Tec has taken steps to ascertain whether Anscott is Year
2000 compliant. In the event Anscott is not Year 2000 compliant, we will explore
engaging another company to provide raw materials. R-Tec is working to identify
alternative sources for manufacturing. R-Tec cannot give any assurances that
other suppliers, distributors and manufacturers of our products would be able to
resolve any Year 2000 issues that may adversely affect their operations. If this
were the case, it could cause delays in the development, production and sale of
our products, which would have a material adverse effect on the continued
development and growth of our business.
Management And Affiliates
Directors, Executive Officers And Key Employees
The names, addresses, ages and respective positions of the current
directors and officers of R-Tec are as follows:
Name Age Position
Philip Lacqua 50 President, Treasurer and
1127 83rd Street Director
Brooklyn, New York 11228
Nancy Vitolo 36 Vice President, Secretary
290 Green Road and Director
Sparta, New Jersey 07871
Marc M. Scola 32 Vice President, General
61 Mallard Drive Counsel and Director
Allamuchy, New Jersey 07820
Damon E. Palmer 35 Director
8380 SW 39 Court
Davie, Florida 33328
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Shawn P. Walsh 24 Director
538 Wren Way
Branchburg, New Jersey 08876
Each director is elected for a period of one year and serves until his
successor is elected by our shareholders.
Philip Lacqua, age 50, will serve as the President, Treasurer and as a
Director of R-Tec. His duties will include responsibility for the overall
management of R-Tec and sales. Mr. Lacqua was awarded a Bachelor of Science
degree from Central College of Iowa in 1970. with a major in Political Science.
Since 1970, Mr. Lacqua has served as President and Vice President for
various companies. In 1971, Mr. Lacqua started Container Maintenance Corp.,
which was in the business of repairing ocean-going containers, trailers and
chassis. At the same time he started CMC Haulage, Inc., which provided for
interstate and intrastate trucking. In 1973, Mr. Lacqua merged his companies
with others and formed Marine Repair Services, Inc. He assumed the title of Vice
President of Sales. Marine Repair was primarily in the business of repairing
containers, trailers and chassis in the New York area. In December, 1977, Mr.
Lacqua sold his interests in CMC Haulage and Marine Repair.
In February, 1978, Mr. Lacqua formed Eastern Industrial Supply Corp., a
ship supply company. Mr. Lacqua then formed Marine Technical Service, Inc., and
served as a Director and President, overseeing all aspects of that company.
Marine Technical specialized in sales to the Far East, the Middle East and
Europe. In June, 1998, Mr. Lacqua resigned as an officer and director of Marine
Technical Service, Inc. to devote all of his attention to R-Tec. Mr. Lacqua
commenced work for R-Tec in May 1996, prior to its incorporation.
Nancy Vitolo, age 36, will serve as a Vice President, Secretary and as a
Director of R-Tec. As such her duties will include public relations. Ms. Vitolo
owned and was employed by Garden State Heating and Air Conditioning Corporation
as a secretary from 1991 until February, 1998. Garden State became one of the
top 50 Bryant/Carrier Dealers in gross sales in the continental U.S. and Canada.
Beginning in March, 1998, Ms. Vitolo worked with R-Tec as a consultant until she
became and employee in April, 1999. Ms. Vitolo was a sales representative for
Yves Saint Laurent for the ten years prior to her association with Garden State.
In 1995, Ms. Vitolo and Mrs. Kaiser began the research project which
resulted in the development of the reactive paint technology now owned by R-Tec.
Ms. Vitolo and Mrs. Kaiser opened a laboratory and engaged scientists to
research the feasibility of creating a better method for detecting minute gas
leaks. A laboratory was leased in Warren County, New Jersey and chemists and
other scientists were engaged to perform research in this area and conduct
experiments. Ms. Vitolo later withdrew from active participation in the project,
but continued to assist Mrs. Kaiser in the funding of the patent. Ms. Vitolo
personally loaned Mrs. Kaiser approximately $425,000 to fund the development of
the patent.
Marc M. Scola, age 32, will serve as a Vice President, General Counsel and
a Director of R-Tec. His duties will include preparing and negotiating R-Tec's
license agreements, contracts, and various other legal and corporate matters.
Mr. Scola was an attorney in private law practice for six (6) years.
Mr. Scola was awarded a Bachelor of Arts degree from Seton Hall University
in South Orange, New Jersey in 1988. He then was awarded his Juris Doctorate (
J.D.) degree by Texas Southern University School of Law in Houston, Texas in
1992. Mr. Scola obtained a Graduate Law Degree (L.L.M.) in Taxation from Temple
University School of Law in Philadelphia, Pennsylvania in 1996.
Mr. Scola began his law practice as a solo practitioner in 1993 with the
Law Firm of Marc M. Scola, Esq., P.C. located in Florham Park, New Jersey. In
January of 1996, Mr. Scola formed the Law Firm of Scola & Walterschied, P.C., a
two-attorney firm, located in Roseland, New Jersey, as a partner. In 1997, Mr.
Scola continued in solo practice as Marc M. Scola, Esq., P.C., in Allamuchy, New
Jersey. Mr. Scola has been working on the R-Tec project since May 1996.
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<PAGE>
Mr. Scola, served as counsel to a wide variety of businesses, including
construction companies, physician practices, manufacturing operations, and
computer consulting firms. Mr. Scola has been involved in the review,
negotiation, financing, employment issues, and restructuring of the business
entities. He also had experience in the preparation of shareholder, partnership
and limited liability company, stock option, employment, leasing and other types
of commercial agreements.
Damon E. Palmer, age 35, was elected to serve as a director of R-Tec on
April 14, 1999, and is also a member of the Compensation and Audit Committees of
the Board. Mr. Palmer is Vice President and Chief Financial Officer of Trinity
Industrial Services, a computer consulting company, since 1998. From 1996 until
1998 he was Controller of Marine Technical Services, which was formed by Mr.
Lacqua. Between 1994 and 1996 he was an office administrator for Edward Jones,
C.P.A. From 1989 until 1994 he was a manager of a branch of the Glidden Company,
which engaged in the business of manufacturing and selling paint products.
Shawn P. Walsh, age 24, was elected to serve as a director on April 14,
1999. He graduated from Johns Hopkins University in Baltimore, Maryland in 1996
with a Bachelor of Science degree in Chemistry. He worked for R.W. Johnson
Pharmaceutical Research Institute in Raritan, New Jersey from December 1996 to
March 1999 as a scientist.
R-Tec has a one year consulting Agreement with Mr. Walsh which terminates
on January 1, 2000. Mr. Walsh has been engaged to perform consulting services
regarding scientific experiments and research on reactive paints. R-Tec is to
pay Mr. Walsh $1,000 per month for a total of $12,000 plus all reasonable out of
pocket expenses. Mr. Walsh has no ownership rights to the patent by virtue of
his assignment of all of his rights to Mrs. Kaiser.
Key Employees And Consultants
The following biographical information relates to our consultants:
Name Position
Stewart R. Kaiser Consultant
Shawn P. Walsh Scientific Consultant, Director
Robert J. Verdicchio Scientific Consultant
Stewart R. Kaiser, age 32, is a graduate of Union County Technical College
in Scotch Plains, New Jersey, receiving a degree in the Heating, Ventilation and
Air Conditioning Mechanical Program. Mr. Kaiser was employed by Garden State Air
Conditioning and Heating from 1991 until February, 1998 as a Mechanical
Contracting Supervisor. From March 1998 until the present, Mr. Kaiser worked as
a consultant for R-Tec. Mr. Kaiser was one of three inventors of the patented
proprietary technology which has been assigned to R-Tec. Mr. Kaiser has no
ownership rights to the patent by virtue of his assignment of all of his rights
to Mrs. Kaiser. Mr. Kaiser is the husband of Nancy Vitolo, and the son of Muriel
Kaiser. Mr. Kaiser has no ownership rights to the patent. On November 4, 1998,
Mr. Kaiser filed for Chapter 7 Bankruptcy protection in the United States
Bankruptcy Court, District of New Jersey. On December 16, 1998, he voluntarily
withdrew his Bankruptcy Petition.
R-Tec has a one year Consulting Agreement with Stewart R. Kaiser, which
terminates on January 1, 2000. Mr. Kaiser has been engaged to perform consulting
services regarding scientific experiments and research on reactive paints. R-Tec
is to pay Mr. Kaiser $1,000 per month for a total of $12,000 plus all reasonable
out of pocket expenses.
Robert J. Verdicchio, age 65, has been employed by Verdi Enterprises, Inc.,
a chemical consulting company of Succasunna, New Jersey, of which he is the
principal owner since January, 1996. He was employed by Johnson and Johnson
Consumer Products in Skillman, New Jersey ,from 1973 until his retirement in
1995. He has been engaged in the development of the patented technology since
1996 and has worked for R-Tec as a consultant since July 1996. He received a
Ph.D. in Metaphysical Science in 1994 from the University of Metaphysics in Los
Angeles, California, a Master of Science degree in 1990 from Fairleigh Dickinson
University, and a Bachelor of Science degree in Organic Chemistry in 1962 from
Rutgers University. He was one of three inventors of the patented proprietary
technology which has been assigned to R-Tec. Dr. Verdicchio has no ownership
rights
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<PAGE>
to the patent by virtue of his assignment of all of his rights to Mrs.
Kaiser. Dr. Verdicchio has agreed to consult for R-Tec on an as needed basis.
Executive Compensation
R-Tec was only recently incorporated, and has not paid any compensation to
its executive officers and directors. R-Tec has entered into employment
agreements dated April 4, 1999 with Marc M. Scola, Nancy Vitolo and Philip
Lacqua, who are officers and directors of R-Tec. The agreement with Mr. Scola
provides for the payment of $330,000 plus bonus per year retroactive from
January 1, 1999 for a five year term and will commence upon the sale of the
minimum number of shares. Mr. Scola is employed as Vice President, director and
General Counsel of R-Tec. Mr. Scola has waived his salary due under the
agreement through March 31, 1999.
The employment agreement with Ms. Vitolo provides for the payment of
$330,000 plus bonus per year retroactive from January 1, 1999 for a five year
term and will also commence upon the sale of the minimum number of shares. Ms.
Vitolo is employed as Vice President, Secretary and director of R-Tec. Ms.
Vitolo has waived her salary due under the agreement through March 31, 1999.
The employment agreement with Mr. Lacqua provides for the payment of
$330,000 plus bonus per year retroactive from January 1, 1999 for a five year
term and will commence upon sale of the minimum number of shares. Mr. Lacqua is
employed as President, Treasurer and director of R-Tec. Mr. Lacqua has waived
his salary due under the agreement through March 31, 1999.
In the event the minimum number of shares offered were sold, Mr. Scola, Mr.
Lacqua and Ms. Vitolo would defer their salaries until sufficient funds were
available. Sale of the minimum number of shares offered would provide sufficient
funds for R-Tec to operate for 24 months without revenue.
In addition, R-Tec established a Stock Option Plan on April 15, 1999 which
provides that all regular full-time employees and key executives may be issued
options to purchase a total of up to one million shares of our common stock at a
price not less than 100% of the fair market value of the shares on the date the
option is granted. The plan is to be administrated by the Stock Option and
Compensation Committee of the Board of Directors, consisting of at least two
disinterested directors. On April 14, 1999 the Board formed a Compensation
Committee which consists of a total of three directors with two disinterested
directors. We also intend to implement a Pension Plan in the near future.
All of our officers are also directors of R-Tec and are, therefore, not
independent. No independent person has reviewed the employment agreements.
However, since April 14, 1999 the Board of R-Tec includes two disinterested
directors who are members of the Compensation and Audit Committees.
If R-Tec sells the maximum amount of shares, $5,485,000 represents an
estimate of the total employee compensation for 48 to 60 months, including
salaries for its officers and staff. The consulting agreements in effect do not
cover full-time employment by these consultants, which must be negotiated at the
appropriate time in the future.
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<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Name Other Securities
and Annual Restricted Underlying LTIP All Other
Principal Compen- Stock Options/ Payouts Compen-
Position Year Salary($) Bonus($) sation($) Awards ($) SARs ($) sation($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Philip Lacqua 1997 --- --- ---- ---- ---- ---- ----
President, Treasurer 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Nancy Vitolo 1997 --- --- ---- ---- ---- ---- ----
Secretary 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Marc M. Scola 1997 --- --- ---- ---- ---- ---- ----
General Counsel 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Damon E. Palmer 1997 --- --- ---- ---- ---- ---- ----
Director 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Shawn P. Walsh 1997 --- --- ---- ---- ---- ---- ----
Director 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
</TABLE>
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<PAGE>
Principal Shareholders
The following table presents the shares of common stock of R-Tec owned of
record or beneficially by each person known to own more than 5% of R-Tec's
common stock, and the name and shareholdings of each officer and director and
all officers and directors as a group:
<TABLE>
<CAPTION>
Percent After Percent After
Principal Stockholder's Number of Percent Prior Minimum Maximum
Name and Addresses Shares Owned to Offering Offering Offering Office(s) Held
<S> <C> <C> <C> <C> <C>
Philip Lacqua 5,000,000 33 1/3% 32% 26.66% Director,
1127 83rd Street President,
Brooklyn, New York 11228 Treasurer
Nancy Vitolo 5,000,000 33 1/3% 32% 26.66% Director,
290 Green Road Vice President,
Sparta, New Jersey 07871 Secretary
Marc M. Scola 5,000,000 33 1/3% 32% 26.66% Director,
61 Mallard Drive Vice President,
Allamuchy, New Jersey 07820 General Counsel
Damon E. Palmer -0- 0% 0% 0% Director
8380 SW 39 Court
Davie, Florida 33328
Shawn P. Walsh -0- 0% 0% 0% Director
538 Wren Way
Branchburg, New Jersey 08876
All Officers and
Directors as a Group 15,000,000 100% 96% 80%
</TABLE>
Certain Relationships and Related Transactions
Mr. Lacqua, Ms. Vitolo and Mr. Scola own 15,000,000 shares. The contributed
$540,000 in capital through March 31, 1999. As of March 31, 1999, $75,857 of
this amount is due pursuant to a promissory note from Ms. Vitolo bearing
interest at 6.0% per annum.
The patent covering R-Tec's proprietary technology was assigned to us by
Muriel Kaiser. Mrs. Kaiser is the mother of Stewart Kaiser and Nancy Vitolo's
mother-in-law. Ms. Vitolo is the wife of Stewart Kaiser. In consideration for
the patent, we executed a promissory note in favor of Mrs. Kaiser. Pursuant to
the promissory note, R-Tec was obligated to pay $850,000 payable in full within
thirty (30) days of the completion of this offering. By letter agreement dated
July 2, 1999, Mrs. Kaiser has agreed that in the event 625,000 shares are not
sold by January 10, 2000, payment will be made by R-Tec's execution of a
promissory note for $850,000 due and payable in equal quarterly payments over a
five-year period at 6% interest.
R-Tec had previously executed an agreement in favor of Philip Lacqua, Nancy
Vitolo and Marc M. Scola under which R-Tec agreed to reimburse Mr. Lacqua, Ms.
Vitolo and Mr. Scola for all expenses advanced by such individuals prior to and
after the date of R-Tec's incorporation. Such expenses include, but are not
limited to, attorneys' fees, accountant fees, office leases, advertising,
travel, and general expenses of this offering. On May 26, 1999, sums due Mr.
Lacqua, Ms. Vitolo and Mr. Scola were reduced or reclassified as equity. No sums
are currently due to Mr. Lacqua, Ms. Vitolo or Mr. Scola.
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<PAGE>
R-Tec presently has two independent directors. The transactions noted above
were ratified by these independent directors who do not have an interest in the
transactions. Any future transactions undertaken by R-Tec with its officers,
directors or 5% shareholders will be on terms no less favorable to R-Tec than
could be obtained from unaffiliated parties.
Indemnification
R-Tec's Articles of Incorporation, as amended, provide that, to the extent
not inconsistent with applicable law, R-Tec shall indemnify and hold harmless
its officers, directors, employees and agents from liability and reasonable
expense from actions in which he or she may become involved by reason of the
fact that he or she was an officer, director, employee or agent. We expect to
obtain an insurance liability policy for this purpose at a cost of approximately
$75,000 - $150,000 per year.
Disclosure Of Commission Position On Indemnification For Securities Act
Liabilities
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and controlling persons of R-Tec pursuant to
the foregoing provisions, or otherwise, R-Tec has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that any claim for indemnification against such liabilities,
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the defense of any action, suit or proceeding), is asserted by such director,
officer or controlling person in connection with the securities being
registered, R-Tec will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of the Court of such issue.
Organization Within Last Five Years
As soon as the money from this offering is made available, R-Tec expects to
make all arrangements necessary so that it can commence commercial operations in
1999.
Description of Securities
The following statements summarize detailed provisions of R-Tec's Articles
of Incorporation and Bylaws, copies of which will be furnished to an investor
upon written request.
Authorized Capital
Our authorized capital stock consists of 50,000,000 shares of $.00001 par
value common stock. We have outstanding 15,000,000 shares of common stock, all
of which are validly issued, fully paid and non-assessable.
Common Stock
The shares being offered are shares of common stock. Currently there are no
markets for the common stock and there can be no assurances there will ever be a
public market in the future.
R-Tec is presently authorized to issue 50,000,000 shares of $.00001 par
value common stock. There are 15,000,000 shares issued and outstanding, and a
maximum of 3,750,000 shares are for sale in this offering. The shares of common
stock being sold will be, when issued in accordance with the terms of the
offering, fully paid and non-assessable.
The holders of common stock, are entitled to equal dividends and
distributions per share with respect to the common stock when and if declared by
the Board of Directors from funds which are legally available. R-Tec has not
paid any dividends on common stock to date and does not anticipate paying
dividends on common stock in the foreseeable future. No holder of common stock
has a pre-emptive right to subscribe for any securities nor are any common
shares subject to redemption or convertible into other securities of R-Tec. Upon
liquidation, dissolution or winding up of R-Tec, and after payment of creditors
and preferred
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<PAGE>
stockholders, if any, the remaining assets will be divided pro-rata on a
share-for-share basis among the holders of the shares of common stock. All
shares of common stock now outstanding are fully paid, validly issued and
non-assessable. Each share of common stock is entitled to one vote with respect
to the election of any director or any other matter upon which stockholders are
required or permitted to vote. Holders of common stock do not have cumulative
voting rights, so that the holders of more than 50% of the combined shares
voting for the election of directors may elect all of the directors, if they
choose to do so and, in that event, the holders of the remaining shares will not
be able to elect any alternate members to the Board of Directors.
Preferred Stock
R-Tec is currently authorized to issue shares of Preferred Stock.
Accordingly, the Board of Directors could authorize the issuance of shares of
Preferred Stock. Preferred Stock may, if and when issued, have rights superior
to those of the common stock offered hereby. The Board of Directors may approve
the issuance of Preferred Stock without a vote by shareholders and conversion
rights may adversely affect the voting power of holders of common stock.
Transfer Agent
The Bank of New York, Inc., One Wall Street, New York, New York 10286, is
the Transfer Agent and Registrar for common stock.
Escrow Agent
The Bank of New York, Inc., One Wall Street, New York, New York 10286 is
the Escrow Agent for subscriptions until the minimum number of shares is sold.
Dividend Policy
We have not paid any dividends on common stock to date and we do not
anticipate paying dividends on common stock in the foreseeable future. We intend
for the foreseeable future to follow a policy of retaining all of its earnings
to finance the development and expansion of our business.
Shares Eligible for Future Sale.
Upon the consummation of this offering at the maximum, we will have
18,750,000 shares of common stock outstanding. Of these shares, the 3,750,000
shares sold in this offering will be freely tradable without restriction or
further registration under the Securities Act, except for any shares purchased
by an affiliate of R-Tec, in general, a person who has a control relationship
with R-Tec, which will be subject to limitations of Rule 144 promulgated by the
Commission under the Securities Act. All of the remaining 15,000,000 shares are
deemed to be restricted securities, as that term is defined under Rule 144
promulgated under the Securities Act, in that such shares were issued in private
transactions not involving a public offering. All of such shares are not
eligible for sale under Rule 144 until December 1, 1999 at which time they will
have been held longer than one year.
Plan Of Distribution
R-Tec, is offering a minimum of 625,000 shares and a maximum of 3,750,000
shares of common stock through it officers and directors on a best-efforts
basis. The factors we considered in determining the offering price of the common
stock were our capital requirements, our negative book value, the percentage of
ownership to be held by investors following the offering, the prospects for our
business, the stage of our product development, the lack of revenue and the
prospects for future revenues, and the current state of the economy in the
United States.
Until the minimum number of shares are fully subscribed, all subscription
payments will be deposited into an escrow account at the Bank of New York. If
less than the minimum number of shares are subscribed within three months after
the effective date of this prospectus or within six months after the effective
date if we elect to exercise the option to obtain an extension of the offering
period, all proceeds will be promptly refunded in full, with interest, and
without any deduction of expenses. Upon sale of the minimum number of shares,
the escrow will be terminated and subscriptions will go directly to R-Tec. This
offering
26
<PAGE>
will end on the earlier of the following:
(1) three months from the effective date of this prospectus if the
minimum number of shares are not sold and fully paid for, or within six months
from the effective date if we elect to exercise the option to obtain this
extension,
(2) the sale of the 3,750,000 shares,
(3) twelve months after the effective date of this prospectus or the
date on which R-Tec decides to close the offering, which will not exceed twelve
months from the effective date of this prospectus.
The offering will be managed by R-Tec without any underwriter. Our officers
and directors will receive no sales commissions or other compensation, except
for reimbursement of expenses actually incurred for such activities. In
connection with their efforts, they will rely on the safe harbor provisions the
Securities and Exchange Act of 1934. Generally speaking, this rule provides an
exemption from the broker/dealer registration requirements of the 1934 Act for
associated persons of an issuer. Our officers and directors will use their best
efforts to find purchasers for the shares.
Investors should be aware that while this offering is being conducted
through our officers and directors, R-Tec retains the right to utilize the
services of broker/dealers who are members of the NASD. We reserve the right to
pay commissions for sales made by broker/dealers in an amount not to exceed 10%
of the sales price. Before the involvement of any broker/dealers in the
offering, R-Tec must obtain a no objection position from the NASD for any
compensation arrangements. Any broker/dealers that sells securities in this
offering may be deemed an underwriter as defined in Section 2(a)(11) of the
Securities Act of 1933. R-Tec will amend the prospectus and the registration
statement of which it is a part to identify any selected broker/dealers at such
time as such broker/dealers sells 5% or more of the offering.
Under Rule 3a4-1 of the Exchange Act, none of the selling shareholders or
employees of R-Tec will be a "broker" as defined in the Exchange Act, solely by
reason of participation in this offering, because:
(1) none is subject to a statutory disqualification, as that term is defined in
Section 3(a)(39) of the Act, at the time of his participation; and
(2) none will receive, directly or indirectly, any commissions or other
remuneration based either directly or indirectly on transactions in securities,
(3) none is an associated person (partner, officer, director, or employee) of a
broker dealer, and
(4) each meets all of the following conditions: (a) primarily performs, or
is intended primarily to perform at the end of the offering, substantial duties
for the issuer otherwise than in connection with transactions in securities; (b)
none was not a broker or dealer, or an associated person of a broker dealer,
within the preceding 12 months; and (c) none will not participate in selling an
offering of securities for any issuer more than once every 12 months.
R-Tec has not made any efforts to retain an underwriter. We believe that we
can sell our stock without utilizing an underwriter and thus, maximize the net
proceeds to fund our business plan.
Residents of California purchasing units must meet one of the following
suitability requirements: an investor must (1) be an "accredited investor"
within the meaning of Regulation D under the Securities Act of 1933; or (2) a
person who (1) has an income of $65,000 and a net worth of $250,000 or (b) has a
net worth of $500,000 (in each case excluding home, home furnishings, and
personal automobiles); or (3) a bank, savings and loan association, trust
company registered under the investment company act of 1940, pension or
profit-sharing trust, corporation, or to the entity which, together with the
corporation's or other entity's affiliates, have a net worth on a consolidated
basis according to the most recent regularly prepared financial statement (which
shall have been reviewed but not necessarily audited, by outside accountants) of
net less than $14,000,000 and subsidiaries of the foregoing; or (4) a person
(other than a person formed for the sole purpose of purchasing the units offered
hereby) who is purchasing at least $1,000,000 in aggregate amount of the units.
Residents of Virginia purchasing units must have a net worth of at least
$225,000 or a net worth of at least $60,000 and an annual income of at least
$60,000. Net worth in all cases is calculated exclusive of home, furnishings and
automobiles. Virginia residents may not invest more than 10% of their readily
marketable assets in the offering.
27
<PAGE>
Penny Stock Rules
Broker/dealer practices in connection with transactions in penny stocks are
regulated by certain penny stock rules adopted by the Securities and Exchange
Commission. Penny stocks generally are equity securities with a price of less
than $5.00 (other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current price and volume
information with respect to transactions in such securities is provided by the
exchange or system). The penny stock rules require a broker/dealer, prior to a
transaction in a penny stock to deliver a standardized risk disclosure document
that provides information about penny stocks and the risks in the penny stock
market. The broker/dealer also must provide the customer with current bid and
offer quotations for the penny stock, the compensation of the broker/dealer and
its salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules generally require that prior to a transaction in a penny
stock, the broker/dealer make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for a
stock that becomes subject to the penny stock rules.
Since R-Tec is offering the shares without the participation of an
underwriter, the offering price has not been determined by negotiation with an
underwriter, as is customary in most offerings, and instead the offering price
has been set arbitrarily by R-Tec.
Legal Matters
To the knowledge of management there is no material litigation pending or
threatened against R-Tec. Legal counsel for R-Tec in connection with this
offering is Brashear & Associates, P.L., 926 N.W. 13th Street, Gainesville, FL
32601.
Experts
The financial statements of R-Tec as of December 31, 1998, included in this
prospectus have been audited by James Moore & Co. P.L., independent certified
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance on such report given upon the authority of that firm
as experts in accounting and auditing.
Change In Independent Accountants
On May 21, 1999, R-Tec engaged James Moore & Co., P.L. as its independent
auditors for the year ending December 31, 1998 to replace the firm of Jurewicz &
Duca, Certified Public Accountants, P.C., who were dismissed as our auditors
effective May 20, 1999. James Moore & Co., P.L. reaudited the financial
statements for the year ended December 31, 1998; no reliance should be placed on
previous financial statements for the same period. R-Tec's Board of Directors
approved the decision to change auditors.
The reports of Jurewicz & Duca, P.C., on the financial statements of R-Tec
from October 29, 1998 (inception) to December 31, 1998 did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. Subsequent to the issuance
of the audit report of Jurewicz & Duca, P.C., information came to the attention
of Jurewicz & Duca, P.C. which they have concluded materially impacts the
fairness and reliability of their audit report and the underlying financial
statements. Due to the dismissal of Jurewicz & Duca, P.C., they have not
addressed these issues and therefore have withdrawn their audit report dated
January 7, 1999. No reliance should be placed on this audit report or the
underlying financial statements.
In connection with the audits of R-Tec's financial statements for the
period ended December 31, 1998, and for the interim period preceding their
dismissal, there were no disagreements with Jurewicz & Duca, P.C. on any matters
of accounting principles or practices, financial statement disclosure or
auditing scope and procedures. In a letter dated June 15, 1999, Jurewicz & Duca,
P.C. have confirmed this understanding.
28
<PAGE>
How To Invest In R-Tec
If you want to purchase shares of R-Tec Technologies, Inc. in this offering
please fill in the information requested below and return with a check payable
to "Bank of New York, Escrow, R-Tec Technologies, Inc. #301472" If you wish to
have the shares issued in street name, in the name of the brokerage firm where
you have an account, please complete the bottom portion of the form. If you are
a resident of a state where we are not authorized to sell stock, your
subscription will be rejected and returned to you in full, without interest or
deduction.
29
<PAGE>
COMMON STOCK PURCHASE AGREEMENT
TO: R-Tec Technologies, Inc., Escrow, P.O. Box 282, Allamuchy, New Jersey 07820
Please issue shares of R-Tec Technologies, Inc.'s common stock in the
amount(s) and name(s) shown below. My signature acknowledges that I have
received the prospectus by which the shares are offered.
Signature:______________________________ Date:__________________
Enclosed is payment for ______________ shares, at $8.00 per share, totaling
$______________________. Please make checks payable to "Bank of N.Y., Escrow,
R-Tec," and indicate account #301472 in legend of check.
Name:_________________________________________________________________
Mailing Address:______________________________________________________
City:___________________ State:_____________ Zip Code:_______________
Telephone No.,________________ Business,_______________ Home
Social Security or Taxpayer ID Number:________________________________
Minimum Investment is $504.00 (U.S. Dollars) (63 shares)
Register the shares in the following name(s) and amount(s):
Name Number of Shares
A)______________________________________ ________________
B)______________________________________ ________________
C)______________________________________ ________________
As (Circle One Below):
Individual Joint Tenants Trust
Tenants in Common Corporation Other
If you would like your stock to be transferred to your Brokerage Account
complete this section. (Complete only if shares will be in the name of the
Brokerage Firm)
Name on Account:______________________________________________________
Name of Brokerage Firm:_______________________________________________
Mailing Address of Brokerage Firm:____________________________________
City:____________________ State:_____________ Zip Code:______________
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<PAGE>
Telephone Number of Broker:___________________________________________
Social Security Number or Taxpayer I.D. Number:_________________________
Broker Account Number:__________________________________________________
WIRE INSTRUCTIONS
Routing No. (ABA) 021000018 (Bank of New York)
Beneficiary: GLA-111/565
Account No. 301472
Date Wired:______________________________________
Amount Wired:____________________________________
Confirm Bank Wire with R-TEC at (888) 299-7832
Please make checks payable to "Bank of N.Y., Escrow, R-Tec," and
indicate account #301472 in legend of check.
- -------------------------------------------------------------------------
Please attach any special mailing instructions other than shown above. You will
be mailed a signed copy of this agreement to retain for your records.
- ---------------------------------------------------------------------------
SUBSCRIPTION ACCEPTED BY R-TEC TECHNOLOGIES, INC.:
______________________________ Dated___________________
Marc M. Scola, Esq.
V.P. & General Counsel
VIRGINIA SUBSCRIBERS
Virginia subscribers must meet the following suitability requirement:
I certify that I am (initial blank) ________ a person who (a) has an annual
income of $60,000 and a net worth of at least $60,000 or (b) has a net worth of
at least $225,000 (in each case excluding home, home furnishings, and personal
automobiles) and that I am not investing more than 10% of my readily marketable
assets in this offering.
MAIL TO: R-Tec Technologies, Inc., Escrow, P.O. Box 282, Allamuchy, New Jersey
07820 - 1(888) 299-7832
Incomplete Forms will be returned to Sender.
<PAGE>
[James Moore & Co., P.L. letterhead]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors,
R-Tec Technologies, Inc.:
We have audited the accompanying balance sheet of R-Tec Technologies, Inc. (a
development stage company), as of December 31, 1998, and the related statements
of operations, stockholders' equity and cash flows for the period from inception
(October 22, 1998) through December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of R-Tec Technologies, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for the
period from inception (October 22, 1998) through December 31, 1998 in conformity
with generally accepted accounting principles.
As more fully described in Note 10 to the financial statements, subsequent to
the issuance of the Company's 1998 financial statements and an audit report
thereon dated January 7, 1999, certain errors were discovered by management.
These errors resulted in an overstatement of previously reported organizational
costs and an understatement of previously reported deferred offering costs as of
December 31, 1998. In addition, an agreement to acquire a patent and agreements
to repay stockholders for certain organizational expenses were subsequently
significantly modified by management of the Company. Accordingly, the 1998
financial statements have been restated to correct these errors and significant
modifications.
/s/James Moore & Co
Gainesville, Florida
May 25, 1999
F - 1
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
--------
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- ------------
(unaudited)
Current assets
<S> <C> <C>
Cash and cash equivalents $ 25,474 $ 43,500
------------- ------------
Equipment 5,425 -
------------- ------------
Other assets
Patent 815,000 815,000
Deferred offering costs 183,964 45,000
Deposits 2,000 1,000
------------- ------------
Total other assets 1,000,964 861,000
------------- ------------
Total Assets $ 1,031,863 $ 904,500
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Accounts payable $ 59,336 $ 7,147
Note payable 826,000 814,000
------------- ------------
Total current liabilities 885,336 821,147
------------- ------------
Commitments and Contingencies (Note 3)
Stockholders' equity
Common stock, par value $.00001 per share,
50,000,000 shares authorized, 15,000,000
shares issued and outstanding 150 150
Due from stockholders (75,857) (96,160)
Additional paid-in capital 539,850 419,850
Deficit accumulated during the development stage (317,616) (240,487)
------------- ------------
Total stockholders' equity 146,527 83,353
------------- ------------
Total Liabilities and Stockholders' Equity $ 1,031,863 $ 904,500
============= ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-2
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Inception
(October 22, Inception
1998) (October 22,
Three-Month Through 1998)
Period Ended December 31, Through
March 31, 1999 1998 March 31, 1999
--------------- ------------- ---------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Revenues $ - $ - $ -
--------------- ------------- ---------------
Expenses
Administrative fees to stockholders 14,500 231,000 245,500
Administrative and start-up 50,629 5,487 56,116
Interest expense 12,000 4,000 16,000
--------------- ------------- ---------------
Total expenses 77,129 240,487 317,616
--------------- ------------- ---------------
Net loss $ (77,129) $ (240,487) $ (317,616)
=============== ============= ===============
Net loss per common share $ (.01) $ (.02) $ (.02)
=============== ============= ===============
Weighted average common shares outstanding 15,000,000 15,000,000 15,000,000
=============== ============= ===============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-3
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the Total
Common Stock Paid-In Due from Development Stockholders'
------------------
Shares Par Value Capital Stockholders Stage Equity
--------- ------------ -------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Initial capitalization, October
1998 15,000,000 $ - $ - $ - $ - $ -
Additional capital contributed
by stockholders, October
1998 through December 1998 - 150 419,850 (96,160) - 323,840
Net loss - - - - (240,487) (240,487)
---------- ----------- -------- ------------ ----------- ------------
Balance, December 31, 1998 15,000,000 150 419,850 (96,160) (240,487) 83,353
Additional capital
contributed by stockholders
January 1999 through March
1999 (Unaudited) - - 120,000 20,303 - 140,303
Net loss (Unaudited) - - - - (77,129) (77,129)
Balance, March 31, 1999 ---------- ----------- -------- ----------- ---------- ------------
(Unaudited) 15,000,000 $ 150 $539,850 $ (75,857) $ (317,616) $ 146,527
========== =========== ======== =========== ========== ============
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
F-4
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Increase (Decrease) In Cash and Cash Equivalents
<TABLE>
<CAPTION>
Inception
(October 22, Inception
1998) October 22,
Three-Month Through 1998)
Period Ended December 31, Through
March 31, 1999 1998 March 31, 1999
-------------- ------------- --------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $ (77,129) $ (240,487) $ (317,616)
-------------- -------------- --------------
Adjustments to reconcile net loss to
net cash used in operating activities:
Unreimbursed expenses contributed to
capital by shareholders 14,500 231,000 245,500
Interest expense - amortization of
discount on note payable 12,000 4,000 16,000
Increase in deposits (1,000) (1,000) (2,000)
Increase (decrease) in accounts payable (611) 147 (464)
-------------- ------------- --------------
Total adjustments 24,889 234,147 259,036
-------------- ------------- --------------
Net cash used in operating activities (52,240) (6,340) (58,580)
-------------- ------------- --------------
Cash flows from investing activities
Patent costs - (5,000) (5,000)
Purchase of equipment (5,425) - (5,425)
-------------- ------------- --------------
Net cash used in investing activities (5,425) (5,000) (10,425)
-------------- ------------- --------------
Cash flows from financing activities
Increase in deferred offering costs (86,164) (38,000) (124,164)
Capital contributed by stockholders 125,803 92,840 218,643
-------------- ------------- --------------
Net cash provided by financing activities 39,639 54,840 94,479
Net increase (decrease) in cash -------------- ------------- --------------
and cash equivalents (18,026) 43,500 25,474
Cash and cash equivalents, beginning of period 43,500 - -
-------------- ------------- --------------
Cash and cash equivalents, end of period $ 25,474 $ 43,500 $ 25,474
============== ============= ==============
Supplemental disclosures of noncash
investing and financing activities
Purchase of patent with note payable $ - $ 810,000 $ 810,000
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-5
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(1) Summary of Significant Accounting Policies:
-------------------------------------------
The following is a summary of the more significant accounting policies and
practices of R-Tec Technologies, Inc. (the Company) which affect the
accompanying financial statements.
(a) Organization and operations--The Company was incorporated on
October 22, 1998, to commercialize and advance the technology of a
recently obtained patent on a type of paint that can detect certain
gases. The Company plans to pursue other applications of this
technology.
(b) Presentation--The Company has devoted substantially all its
efforts to date to raising capital to commercialize its technology and
has no revenues. Therefore, these financial statements have been
prepared in accordance with Statement of Financial Accounting Standards
No. 7 Accounting and Reporting by Development Stage Enterprises.
(c) Unaudited information--In the opinion of management, all
adjustments consisting only of normal recurring adjustments necessary
for a fair presentation of the financial position at March 31, 1999;
the results of operations and cash flows for the three months then
ended; and the results of operations and cash flows for the period from
inception though March 31, 1999, have been made. Operating results for
the three month period ended March 31, 1999, are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1999.
(d) Use of estimates--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect certain
reported amounts and disclosures. Accordingly, actual results could
differ from those estimates.
(e) Cash and cash equivalents--For the purposes of reporting cash
flows, the Company considers all highly liquid investments with an
original maturity of three months or less to be cash equivalents.
(f) Equipment--Equipment is recorded at cost. No depreciation has been
recorded in the accompanying financial statements since the equipment
has not been placed in service.
(g) Deferred offering costs--Costs directly attributable to the
proposed stock offering as described in Note 2 are deferred and
offset against the proceeds from the offering if successful or
expensed if the offering is not successful.
(h) Patent--Patents are recorded at the cost of acquisition if
purchased or if developed internally, the accumulation of the direct
costs incurred to obtain the patent. No amortization has been recorded
in the accompanying financial statements since the patent has not been
placed in service.
(i) Deferred income taxes--Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective income tax bases.
Deferred tax assets and liabilities are measured using enacted rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
F-6
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(1) Summary of Significant Accounting Policies: (Continued)
------------------------------------------
(j) Loss per common share--Loss per common share is computed using the
weighted average of shares outstanding during each period presented
in accordance with Statement of Financial Accounting Standards No. 128
Earnings Per Share.
(k) Start-up costs--The initial costs incurred to organize the Company
are expensed when incurred.
(l) Advertising--Advertising costs are expensed when incurred.
(2) Proposed Public Offering of Common Stock:
-----------------------------------------
The Company is offering 3,750,000 shares of its common stock for sale at $8.00
per share, which is expected to raise between $5,000,000 and $30,000,000.
There is no assurance the offering will be successful.
(3) Commitments and Contingencies:
------------------------------
The Company has entered into a five year exclusive manufacturing agreement
with a specialty chemical manufacturer for certain of the Company's initial
products expiring in October 2003.
On April 14, 1999, the Company entered into five year employment contracts with
its three principal officers for total annual salaries of $990,000 beginning on
January 1, 1999. The officers have waived their salaries for the three months
ended March 31, 1999. No amounts have been reflected in the accompanying
financial statements because the Company is in the earliest phases of
development.
On April 14, 1999, the Company adopted a stock bonus plan for certain classes
of employees and reserved 1,000,000 shares of its authorized but unissued
common stock under this plan. No stock options have been granted.
The Company has one year service contracts with two consultants beginning
January 1, 1999. The contracts specify a minimum payment of $1,000 per month.
The contracts can be cancelled with thirty days written notice by either party.
The Company expensed $2,000 and the consultants waived $4,000 in payments under
the contracts for the three months ended March 31, 1999.
The Company leases an office facility under a one year operating lease with a
monthly rent of $1,000. A second office is leased from a stockholder under a
two year lease at $2,000 per month. Rent expense was $10,000 for 1998 and
$9,000 for the three months ended March 31, 1999.
F-7
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(4) Note Payable:
-------------
The Company purchased a patent from a related party (see Note 6) on December 1,
1998, the terms which were substantially modified on May 10, 1999. The purchase
price for the patent was $850,000 under a promissory note due in full within
thirty days of the completion of the minimum funding of the stock offering
described in Note 2. Interest at 6% accrues on the unpaid amount from the date
of the completion of the minimum funding until paid in full. As of the date of
the agreement, the patent and note payable have been recorded at $810,000 which
represents the net present value of the note payable with a face amount of
$850,000. The accompanying financial statements reflect the new terms of this
transaction.
(5) Income Taxes:
-------------
The Company has a deferred tax asset of approximately $75,000 at December 31,
1998, due to the net loss incurred since inception. Temporary differences giving
rise to deferred tax assets consist primarily of the deferral of substantially
all start-up expenses for income tax purposes. Management has provided a
valuation allowance equal to the amount of the deferred tax assets at December
31, 1998 due to the uncertainty of realization of the future benefit of these
future deductions. Therefore, no income tax provision or benefit is provided in
the accompanying statements of operations.
(6) Related Party Transactions:
---------------------------
Certain unreimbursed administrative expenses of the Company were incurred by two
shareholders, both before and after the Companys' incorporation on October 22,
1998. The Company recorded $14,500 and $231,000 as administrative fees to
stockholders and as an increase in additional paid in capital for the three
months ended March 31, 1999 and for the period ended December 31, 1998,
respectively, in the accompanying financial statements.
The Company is owed $75,857 and $96,160 from stockholders for amounts due for
additional paid-in capital as of March 31, 1999 and December 31, 1998,
respectfully. These amounts have been reflected as a reduction in stockholder
equity in the accompanying financial statements.
The Company purchased a patent under terms described in Note 4 from a relative
of a shareholder/officer of the Company. The Company owes this related party
$850,000 at December 31, 1998.
(7) Concentrations of Credit Risk:
------------------------------
Significant concentrations of credit risk for all financial instruments owned by
the Company are as follows:
(a) Demand deposits--The Company has demand deposits in one bank,
which are insured by the Federal Deposit Insurance Corporation (FDIC)
up to $100,000. The bank balance was $29,033 and $48,500 at March 31,
1999 and December 31, 1998, respectively. The Company has no policy of
requiring collateral or other security to support its deposits.
F-8
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(7) Concentrations of Credit Risk: (Continued)
-----------------------------
(b) Due from stockholders--The Company is owed $75,857 from one
stockholder at March 31, 1999, and $96,160 from two stockholders at
December 31, 1998. The Company has no policy of requiring collateral
or other security to support these amounts.
(8) Fair Value of Financial Instruments:
------------------------------------
Statement of Financial Accounting Standards No. 107 Disclosures about Fair
Values of Financial Instruments requires disclosure of fair value to the extent
practicable for financial instruments which are recognized or unrecognized in
the balance sheet. The fair value disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the
fair value amount consider the tax consequences of realization or settlement.
The following table summarizes financial instruments by individual balance sheet
account as of December 31, 1998:
Carrying Amount Fair Value
--------------- ----------
Financial Assets
Cash and cash equivalents $ 43,500 $ 43,500
Due from stockholders 96,160 96,160
--------------- ----------
Total financial assets $ 139,660 139,660
=============== ==========
Financial Liabilities
Accounts payable $ 7,147 $ 7,147
Notes payable 814,000 850,000
--------------- ----------
Total financial liabilities $ 821,147 $ 857,147
=============== ==========
The fair value of financial instruments approximates carrying value due to the
short-term maturity of the instruments.
(9) Reorganization:
---------------
The Company reorganized December 1, 1998, and increased the common stock
outstanding from 1 million to 15 million shares. On April 18, 1999, the Company
increased the number of authorized shares of common stock from 25 to 50 million
shares. The accompanying financial statements retroactively reflect these
changes for all periods presented.
F-9
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(10) Restatement of Previously Issued Audited Financial Statements:
Subsequent to the issuance of the Company's 1998 financial statements and an
audit report thereon dated January 7, 1999, certain errors were discovered by
management. These errors resulted in an overstatement of previously reported
organizational costs and an understatement of previously reported deferred
offering costs as of December 31, 1998. In addition, an agreement to acquire a
patent and agreements to repay stockholders for certain organizational expenses
were subsequently significantly modified by management of the Company.
Accordingly, the 1998 financial statements have been restated to correct these
errors and significant modifications. The effect of these errors and changes was
to increase the net loss and deficit accumulated during the development stage by
$227,065, decrease total assets by $456,854, decrease total liabilities by
$553,626 and increase paid-in capital by $323,837. Components of these errors
and changes and their effect on net income and earnings (loss) per share are as
follows:
<TABLE>
<CAPTION>
Earnings
Income (Loss) Per-
Amounts (Loss) Effect share Effect
--------- ------------- ------------
<S> <C> <C> <C>
Organization costs previously capitalized - expensed $ 228,065 $ (228,065) $ (.01)
in restatement
Organization costs previously capitalized -
reclassified as deferred offering costs in restatement 45,000 - -
Patent costs previously expensed - capitalized in restatement 5,000 5,000 -
Modification of patent acquisition agreement, previously
capitalized at $1 - recorded at net present value and corresponding
obligation was recorded in restatement 814,999 - -
Imputation of interest expense on patent acquisition recorded in
restatement 4,000 (4,000) ( - )
Organization costs due to stockholders under notes payable
previously recorded - eliminated in restatement 1,050,936 - -
Loans from stockholders previously recorded - reclassified
as paid-in capital in restatement 323,840 - -
Additional capital due from stockholders was recorded in restatement 96,160 - -
============
Totals ------------ -------------
$ (227,065) $ (.01)
============= =============
</TABLE>
The Company has restated its previously issued audited financial statements,
which were audited by other auditors and whose opinion was dated January 7,
1999. Any previously issued financial statements of the Company should not be
relied upon for any purpose.
F-10
<PAGE>
TABLE OF CONTENTS
Prospectus Summary 3
Risks Factors 5
Recent Developments 7
Where You Can Find
Additional Information 7
Dilution 8
Use of Proceeds 9
Selected Financial
Data 12
Management's Discussion
and Analysis or Plan of
Operation 12
Business 13
Management and Affiliates 19
Principal Shareholders 24
Certain Relationships
and Related Transactions 24
Description of Securities 25
Plan of Distribution 26
Legal Matters 28
Experts 28
Change in Independent
Accountants 28
How to Invest in R-Tec 29
Financial Statements F-1
----------
R-Tec Technologies, Inc.
3,750,000 Shares Common Stock
$8.00 per share
-------------------------
Until __________, 1999, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may be
required to deliver a prospectus. This is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters with respect to
their unsold allotments or subscriptions. This prospectus should be read in its
entirety by any prospective investor prior to his or her investment.
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution*
The following table sets forth the estimated costs and expenses to
be paid by R-Tec in connection with the offering described in the registration
statement.
SEC registration fee $ 8,340.00
Blue sky fees and expenses $ 25,000.00
Printing and shipping expenses $ 20,000.00
Legal fees and expenses $200,000.00
Accounting fees and expenses $ 50,000.00
Transfer and escrow expenses $ 45,000.00
Advertising expenses and miscellaneous $151,660.00
Total $500,000.00
* All expenses except SEC registration fee are estimated.
ITEM 14. Indemnification of Directors and Officers.
The Registrant's Articles of Incorporation, Article Eight, provide
that R-Tec shall indemnify and hold harmless its directors, employees and agents
from liability and reasonable expenses from actions in which he or she may
become involved by reason of the fact that he or she was an officer, director,
employee or agent.
Insofar as indemnification for liabilities arising under the
Securities Act, indemnification may be provided to directors, officers or
persons controlling the Registrant pursuant to the foregoing section. The
Registrant has been informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
ITEM 15. Recent Sales of Unregistered Securities.
On November 26, 1998, Mr. Lacqua, Ms. Vitolo and Mr. Scola received
a total of 15,000,000 shares in conjunction with formation of R-Tec
Technologies, Inc. They made capital contributions of $540,000 through
March 31, 1999.
ITEM 16. Exhibits and Financial Statement Schedules
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
3.0* Certificate of Incorporation dated October 21, 1998.
3.1* Amended and Restated Articles of Incorporation, dated November 24, 1998.
3.2* Amended and Restated Articles of Incorporation, dated December 18, 1998.
3.3* Certificate of Amendment to the Certification of Incorporation of R-Tec
Technologies, Inc., dated April 18, 1999.
3.4* By-laws, dated November 4, 1998.
3.5* R-Tec Technologies, Inc. Policy Against Insider Trading.
3.6* Form of common stock certificate.
5.0* Opinion and consent of Brashear & Associates, P.L.
10.0* Patent Assignment dated November 2, 1998 between Muriel Kaiser and R-Tec
Technologies, Inc.
II-1
<PAGE>
10.1* Patent Assignment dated March 30, 1999 between Muriel Kaiser and R-Tec
Technologies, Inc.
10.2* Promissory Note dated April 15, 1999 between Nancy Vitolo, Muriel Kaiser
and R-Tec Technologies, Inc.
10.4* Promissory Note dated April 15, 1999 between Nancy Vitolo and R-Tec
Technologies, Inc. for reimbursement of start up costs.
10.5* Promissory Note dated April 22, 1999 between Marc M. Scola and R-Tec
Technologies, Inc. for reimbursement of start up costs.
10.6* Promissory Note dated April 22, 1999 between Columbia Trading, Inc. and
R-Tec Technologies, Inc. for reimbursement of consulting fees and
start up costs.
10.7* Promissory Note dated April 22, 1999 between R-Tec Technologies, Inc.
and Marc M. Scola for reimbursement of office lease, secretaries,
postage, and other cost incurred, prior to incorporation.
10.8* Expense Reimbursement Agreement between Marc M. Scola, Philip Lacqua and
Nancy Vitolo and R-Tec Technologies, Inc. dated October 24, 1998
regarding start up costs.
10.9* Employment Agreement between R-Tec Technologies, Inc. and Marc M. Scola.
10.10* Employment Agreement between R-Tec Technologies, Inc. and Nancy Vitolo.
10.11* Employment Agreement between R-Tec Technologies, Inc. and Philip Lacqua.
10.12* Consultant Agreement dated January 5, 1999 between Stewart Kaiser and
R-Tec Technologies, Inc.
10.13* Consultant Agreement dated January 11, 1999 between Shawn Walsh and
R-Tec Technologies, Inc.
10.14* Exclusive Manufacturer's Agreement dated October 21, 1998 between
Anscott Chemical Industries and R-Tec Technologies, Inc.
10.15* Distribution Agreement between R-Tec Technologies, Inc. and Motors &
Armatures Corp.
10.16* Stock Transfer Agency Agreement between R-Tec Technologies, Inc. and
Bank of New York dated as of January, 1999.
10.17* Subscription Escrow Agreement between R-Tec Technologies, Inc. and Bank
of New York dated as of January 26, 1999.
10.18* Stock Option Plan adopted April 15, 1999.
10.19* Intellectual Property Evaluation dated May 31, 1999 by Intellectual
Property Valuators.
10.20* Promissory Note executed by Nancy Vitolo in favor of R-Tec Technologies,
Inc. in the original principal amount of $75,857 dated May 10, 1999.
10.21* Promissory Note executed by R-Tec Technologies, Inc. in favor of Muriel
Kaiser in the original principal amount of $850,000 dated May 10,
1999.
10.22* Release regarding Patent dated May 10, 1999 between R-Tec Technologies,
Inc. and Muriel Kaiser.
10.23* R-Tec Resolution dated June 1, 1999.
10.24* Letter agreement with Muriel Kaiser dated July 2, 1999.
10.25* Letter dated July 6, 1999 waiving officers salaries in the event
minimum shares are sold.
16.00* Jurewicz and Duca's letter regarding change in independent accountants
dated June 15, 1999.
16.01 Jurewicz and Duca's letter regarding change in independent accountants
dated July 23, 1999.
23.0 Consent of James Moore & Co., L.P.
23.1 Consent of Property Valuations.
23.2 Consent of Property Valuations date July 22, 1999.
23.3 Consent of Motors and Armatures.
27.0* Financial Data Schedule.
* Previously filed
II-2
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULE
The Financial Statement Schedule as of December 31, 1998 and the Report of
Independent Public Accountants on such schedule are included in this
Registration Statement. All other schedules are omitted because they are not
applicable or are not required under Regulation S-X.
ITEM 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424 (b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs in contained in periodic reports filed with
or furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That for the purpose of determining liability under the Securities Act
of 1933 each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements
required by Section 210.3-19 of this chapter at the start of any delayed
offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided that the registrant includes in the prospectus, by means of
a post-effective amendment, financial statements required pursuant to this
paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to
registration statements and information required by Section 10 (a)(3) of the Act
or Section 210.3-19 of this chapter if such financial statements and
information are contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the Form
F-3.
(f) The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
II-3
<PAGE>
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(i) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933,
(i) the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 42A (b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determing any liability under the Securities Act of 1933,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this third amendment to its registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Allamuchy, State of New Jersey, on July 23, 1999.
R-Tec Technologies, Inc.
By: /s/ PHILLIP LACQUA
------------------------
Philip Lacqua
President and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS THIRD
AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED:
Signatures Title Date
/s/ PHILLIP LACQUA
__________________ President and July 23, 1999
Philip Lacqua Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Director
/s/ NANCY VITOLO
________________ Director July 23, 1999
Nancy Vitolo
/s/ MARC M. SCOLA
_________________ Director July 23, 1999
Marc M. Scola
________________ Director July , 1999
Damon E. Palmer
________________ Director July , 1999
Shawn P. Walsh
CHANGE IN CERTIFYING ACCOUNTANTS
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington D.C. 20549
July 22, 1999
Ladies and Gentlemen:
We have read the statements made by the registrant in the section titled
"Change in Independent Accountants" of the Registration Statement (Form S-1
Amendment No. 4 File No. 333-72405) and related Prospectus of R-Tec
Technologies, Inc. in response to Item 304 of Regulation S-K and are in
agreement with the statements set forth. We have no basis to agree or disagree
with other statements of the registrant contained therein.
/s/ Jurewicz & Duca
JUREWICZ & DUCA
Certified Public Accountants, P.C.
Garden City, New York
[James Moore & Co., P.L. letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File No.
333-72405) of our report dated May 25, 1999, on our audit of the financial
statements of R-Tec Technologies, Inc. We also consent to the reference to our
firm under the caption "Experts"
/s/ James Moore & Co.
JAMES MOORE & CO, P.L.
Gainesville, Florida
July 23, 1999
[Intellectual Property Valuators Letterhead]
We hereby consent to the references made to us, and to our value
conclusions by R-Tec Technologies, Inc., including the reference made to our
Patent Appraisal of May 20, 1999 and, the reference made to us under the Patent
Valuation Section, in the S-1 Registration Statement, File No. 333-72405. In
addition, we consent to the filing of our Intellectual Property Appraisal as an
exhibit to the Registration Statement. In giving such consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
INTELLECTUAL PROPERTY VALUATORS
/s/
____________________________
JEAN PIERRE DE CHALAIN
(Director)
Authorized this 22nd day of July , 1999.
[letterhead]
[Motors & Armatures Letterhead]
July 22, 1999
Consent of Motors & Armatures
We hereby consent to the references by R-Tec Technologies, Inc., to us, to our
name, to our test results and methods regarding R-Tect 22, and to our dealings
regarding the distribution agreement and plans for ordering products made under
the Summary Section, the Business Section and elsewhere in the S-1 Registration
Statement, File No. 333-72405. In addition, we consent to the filing of the
Distribution Agreement with R-Tec as an exhibit to the Registration Statement.
In giving such consent, we do not thereby admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Motors & Armatures, Inc.
/s/ Fred H. Baron
Fred H. Baron
Marketing Manager
