As filed with the Securities and Exchange Commission on June 11, 1999.
REGISTRATION NO. 333-72405
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM S-1
AMENDMENT NO. 2
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. [ ]
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 Share1 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 Estimatd 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
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
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 June 11, 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 be
and other technologies which held in escrow by the Bank of New
detect leaks from freon and York and paid to R-Tec only if:
other gases by changing color.
We intend to sell the paints and o at least 625,000 shares are sold,
to develop new products to detect o within three (3) months after the
other types of gas leaks. effective date of this prospectus
or six months after the effective
This is our initial public date of the prospectus, if extended
offering. There is currently by R-Tec.
no public market for the common
stock.
Otherwise all subscription will be
All of the shares to be sold in returned to you with interest.
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 $ 8.00 $ 8.00 $ 7.20
Share......................
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 some of the 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 June __, 1999
<PAGE>
Table of Contents
PROSPECTUS SUMMARY...........................................................3
RISKS FACTORS ...............................................................5
RECENT DEVELOPMENTS..........................................................7
WHERE YOU CAN FIND
ADDITIONAL INFORMATION.....................................................7
DILUTION ....................................................................7
USE OF PROCEEDS..............................................................8
SELECTED FINANCIAL DATA ....................................................11
MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION.............................................11
BUSINESS....................................................................12
MANAGEMENT AND AFFILIATES...................................................17
PRINCIPAL SHAREHOLDERS .....................................................20
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS......................................................20
DESCRIPTION OF SECURITIES...................................................21
PLAN OF DISTRIBUTION .......................................................22
LEGAL MATTERS...............................................................23
EXPERTS.....................................................................24
CHANGE IN INDEPENDENT ACCOUNTANTS...........................................24
HOW TO INVEST IN R-TEC......................................................24
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 and neutralizing 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 the products
has been confirmed by an independent third-party, Motors & Armatures Corp. which
tested the product and formulations and found that they meet Motors & Armatures'
standards for commercial leak testing of critical charge refrigeration and air
conditioning systems. They subsequently issued a purchase order to R-Tec for a
quantity of 5,000 kits. 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 primarily preparing the documentation related to
this offering.
R-Tec's proprietary technology is protected by a patent which is
owned by R-Tec. We have developed three gas detecting paints. The paints change
color when gas escapes through the coated junction allowing for rapid detection
and neutralization of small gas leaks. We believe our existing products have
broad application in areas such as the manufacture and installation of air
conditioning and refrigeration systems. In addition to detecting leaks we
believe that some of our products will also neutralize the chloroflurocarbon
contained in the leaking gas by removing the chlorine and florene and, possibly,
rendering the leaking gas inert and potentially harmless to the ozone layer.
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, designed to detect carbon dioxide leaks,
a natural gas detection reactive paint and a propane leak detection reactive
paint product. 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.
R-Tec Technologies, Inc. has a two phase plan for developing its
business. In Phase 1, R-Tec intends to establish manufacturing and distribution
relationships and commence distribution of three products. In Phase 2, we will
expand our product lines. As a result of the lead times required to implement
this strategy, we do not expect to realize significant revenues from sales
before at least six months following completion of this offering.
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
Estimated Net Proceeds
(assuming all offered
shares are sold)...................................$26,500,000.00
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 The Minimum Number Of Shares, We May Not Be Able To Operate For
More Than 24 Months Without Revenue Or Additional Financing.
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's operations will
likely be adversely affected 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 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 would adversely
affect the operation of R-Tec.
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. However, we have a contract with
Anscott Chemical Corp. to manufacture three of our 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.
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. At present, no public market exists
for R-Tec's common stock. R-Tec hopes that it will be able, at some time in the
future, to have its common stock quoted on the NASDAQ Small Cap Market. However,
if we are unable to qualify for listing on the NASDAQ Small Cap Market, our
common stock will be quoted on the NASD inter-dealer Electronic Bulletin Board
system upon completion of this offering. There can be no assurance that any
market will develop for the securities or that if a market does develop, that it
will continue.
R-Tec's Business Is Dependent On Patent Protection Which Cannot Be Assured.
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. The technology
for developing R-Tec's products will be protected by a patent exclusively
assigned to R-Tec. However, due to typographical error, this assignment was
erroneously made to an unrelated company named "R-Tec, Inc." We have taken all
steps recommended by the U.S. Patent and Trademark Office to correct this error
and other measures which we believe to be prudent to rectify this error.
5
<PAGE>
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. However, Motors & Armatures Corp. has
tested the sensitivity of our products. 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, it will have an adverse impact on us and
may 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. Investors in this offering will contribute to the
capital of R-Tec a disproportionately greater percentage than the ownership they
receive.
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. We believe that our technology is unique in
that no other products detect gas leaks using chemical reactions.
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.
We May Not Be Able To Obtain Or Maintain A Listing On The NASDAQ
Small Cap Market Or The OTC Bulletin Board, So You May Not Be Able To Sell Your
Shares Easily.
Because we may not be able to obtain or maintain a listing on the
NASDAQ Small Cap Market or the OTC Bulletin Board, your shares may be difficult
or impossible to sell. Trading in our common stock, if any, is intended to be
conducted on the NASDAQ Small Cap Market, after the initial offering period.
However if we are unable to qualify for this listing, we believe that our stock
will trade on over-the-counter market on the OTC Bulletin Board, which was
established for securities that do not meet the Nasdaq Small Cap Marketsm
listing requirements. Consequently, selling your common stock would be more
difficult because smaller quantities of stock could be bought and sold,
transactions could be delayed, and security analysts' and news media's coverage
of R-Tec may be reduced. These factors could result in lower prices and larger
spreads in the bid and ask price for our 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 any state 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 a registration is not approved, it will be more difficult
for us to sell the minimum number of shares.
6
<PAGE>
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 obtains worldwide recognition with their 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. 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.
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 2,500,000 1,250,000 625,000
shares sold shares sold shares sold shares 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>
7
<PAGE>
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>
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.
8
<PAGE>
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
PURPOSE AMOUNT PROCEEDS
- ------- ------ ----------
Research and Development Activities $ 7,011,080 26.46%
Salary Expense 5,485,000.00 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 all the shares offered would provide sufficient
funds for R-Tec to operate 36 to 48 months without revenue.
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
9
<PAGE>
The chart below represents the use of proceeds if $10,000,000 of common
stock is sold. Sale of all 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 350,000 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. Sale of all the shares offered would provide
sufficient funds for R-Tec to operate 24 months without revenue.
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 24 to 60 months following completion of this offering.
If only the minimum is sold, R-Tec believes it will be able to operate for up to
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.
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If less than all the shares are sold, the net proceeds to R-Tec will
be reduced and the allocations presented will have to be substantially revised.
The likely effect of any reduction in the net proceeds received will be to
lengthen the time it takes us to develop additional products, delays in the
introduction of our products to market and the need for R-Tec to seek additional
funding.
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 the promissory notes and patent expense.
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 consolidated 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 is a start up company with a patented technology for paints
and other products which may be used to detect and neutralize 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 5,000 kits of R-Tect 22 reactive
paint from Motors & Armatures Corp., one of the largest distributors of air
conditioning, refrigeration and heating parts and supplies to wholesalers and
original equipment manufacturers in the United States.
We also have a manufacturing contract with Anscott Chemical
Industries, Inc., a manufacturer of chemical products. Anscott has the exclusive
right under the contract to manufacture R-Tect 12, R-Tect 22 and R-Tect carbon
dioxide reactive paints for a five-year period.
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.
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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 is a development stage company and 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. 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, the Company 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 R-Tec to relinquish rights to certain of its
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 is a development stage company. 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 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. However,
electronic ionization detectors are limited to the specific gas they are
designed to detect. 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
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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.
Our Proposed Business
R-Tec was formed to reduce to industrial production the proprietary
technology contained in a patent transferred to R-Tec and to use this
proprietary technology to develop and manufacture reactive paints and other
products that could be used to coat pipe junctions. Once sealed with the paint,
if gas escapes through the junction, the gas would pass through the paint
causing 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, (e.g., in homes, vehicles and commercial
buildings), the manufacturer or installer may apply our paint to the joints of
the system. The application, placed externally on the system, waits for leaking
gas to pass through it. When this occurs, the blue paint should change to a
bright florescent yellow that is easily visible, thereby, identifying a leak
from the inside out only and does not react with gas in the environment. Thus,
the exact location of the leak is identified. Our paint not only detects gas
leaks from a system, but we believe it also neutralizes the chloroflurocarbons
passing through it 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, the paint 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 of 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-134, 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:
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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
o The commencement of commercial distribution of our reactive paint
products, R-Tect 12, R-Tect 22, and R-Tect carbon dioxide reactive
paints.
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. However, R-Tec has
already received a purchase order from Motors & Armatures for 5,000 R-Tect 22
leak detection kits at $44.00 per kit for a total of $220,000.00.
The current status of R-Tec's efforts to implement its Phase 1
strategy is outlined below:
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 have also reached a distribution agreement with Motors & Armatures.
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 it 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 5,000 kits 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
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.
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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
We believe that revenues from Phase 1 operation will continue to
grow and expand in the markets identified. R-Tec further anticipates that
additional product lines will be realized in Phase 2 and 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.
We expect that the R-Tec natural gas detection reactive paint will
be made available for distribution during Phase 1 and the transition into Phase
2 will occur with the next gas leak detection system: Propane. We also expect to
attempt to develop the following gas leak detection systems:
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 Ethylene
Other Potential Applications Of R-Tec's Detection Technology.
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
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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 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.
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 of
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.
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 retain at least nine of the present
employees and hire approximately ten additional personnel.
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 paint 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.
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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. If payment is not
made by January 10, 2000, R-Tec has agreed to assign the patent to Muriel
Kaiser.
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 assurances that foreign 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.
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
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Damon E. Palmer 35 Director
8380 SW 39 Court
Davie, Florida 33328
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 was elected Secretary of Garden State Heating and Air Conditioning
Corporation in July of 1994. Garden State became one of the top 50
Bryant/Carrier Dealers in gross sales in the continental U.S. and Canada. 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 joined 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 with Marc M. Scola,
Esq., P.C., in Allamuchy, New Jersey. Since May 1996, Mr. Scola has been
working on the R-Tec project.
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.
18
<PAGE>
Damon E. Palmer, age 35, was elected to serve as a director of R-Tec
on April 14, 1999 and he 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. He received a degree in the Heating,
Ventilation and Air Conditioning Mechanical Program. Mr. Kaiser was the
technical manager of Garden State Air Conditioning and Heating from 1991 to
1994. Mr. Kaiser was one of three inventors of our 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 Mrs. Kaiser $1,000 per month for a total of $12,000 plus
all reasonable out of pocket expenses.
Robert J. Verdicchio, age 65, is employed by Verdi Enterprises, Inc.
of Succasunna, New Jersey, of which he is the principal owner. 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. Prior to his employment at Verdi, he
was employed by Johnson and Johnson Consumer Products in Skillman, New Jersey
since 1973. 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 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, its officers and directors. 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.
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<PAGE>
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 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 24 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.
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: Each person listed below
serves as both an officer and director of R-Tec.
Principal Stockholder's Number of Percent Prior Percent
Name and Addresses Shares Owned to Offering After Offering
Philip Lacqua 5,000,000 33 1/3% 26.66%
1127 83rd Street
Brooklyn, New York 11228
Nancy Vitolo 5,000,000 33 1/3% 26.66%
290 Green Road
Sparta, New Jersey 07871
Marc M. Scola 5,000,000 33 1/3% 26.66%
61 Mallard Drive
Allamuchy, New Jersey 07820
Damon E. Palmer -0- 0% 0%
8380 SW 39 Court
Davie, Florida 33328
Shawn P. Walsh -0- 0% 0%
538 Wren Way
Branchburg, New Jersey 08876
All Officers and
Directors as a Group 15,000,000 100% 80%
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.
20
<PAGE>
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.
R-Tec's patent agreement dated May 10, 1999, with Mrs. Kaiser provides if R-Tec
does not pay $850,000 to Mrs. Kaiser by January 10, 2000, R-Tec will transfer
the patent to Mrs. Kaiser.
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.
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
R-Tec is a development stage company and has no operating history.
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.
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<PAGE>
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 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., 1 Wall Street, New York, New York 10286,
is the Transfer Agent and Registrar for common stock.
Escrow Agent
The Bank of New York, Inc., 1 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. 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 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,
22
<PAGE>
(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.
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.
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.
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<PAGE>
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.
R-Tec has engaged James Moore & Co., P.L. as its independent auditors for
the year ending December 31, 1998 to replace the firm of Jurewiez & Duca,
Certified Public Accountants, P.C., who were dismissed as our auditors effective
May 25, 1999. The decision to change auditors was approved by R-Tec's Board of
Directors.
The reports of Jurewicz & Duca, P.C., on the consolidated 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.
In connection with the audits of R-Tec's consolidated financial
statements for the period ended December 31, 1998, there were no disagreements
with Jurewicz & Duca, P.C. on any matters of accounting principles or practices,
financial statement disclosure or auditing scope and proceedings.
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.
24
<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 and had an opportunity to read the prospectus by which the shares are
offered, that I am purchasing for investment, that I am capable of evaluating
the merits and risks of the prospective investment, because my knowledge and
experience in financial and business matters and that the amount of my
investment is not more than 10% of my net worth.
Signature________________________ Date_____________
Enclosed is payment for ____________ shares, at $8.00 per share, totaling
$_______________. Please make payable to "Bank of New York, Escrow, R-Tec
Technologies, Inc.," and indicate account #301472 in legend of check.
Minimum Investment is $504.00 (63 shares)
Register the shares in the following name(s) and amount(s):
Name Number of Shares
A)____________________________ __________________
B)____________________________ __________________
C)____________________________ __________________
As (Circle One):
Individual Joint Tenants Trust
Tenants in Common Corporation Other
Name:__________________________________________________________________________
Mailing Address:_______________________________________________________________
City:_______________________ State:_______________________ Zip Code: _________
Telephone No.,_______________ Business:____________________ Home:_____________
Social Security or Taxpayer ID Number:_________________________________________
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:______
Telephone Number of Broker:________________________________
Social Security Number or Taxpayer I.D. Number:__________________
Broker Account Number:__________________________________________
25
<PAGE>
Please make checks payable to "Bank of N.Y., Escrow, R-Tec,
Technologies, Inc." 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
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R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
OCTOBER 22, 1998 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1998, INCLUDING
THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
<PAGE>
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.
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>
TABLE OF CONTENTS ------------------
PROSPECTUS SUMMARY 3
RISKS FACTORS 5 R-Tec Technologies, Inc.
RECENT DEVELOPMENTS 7
WHERE YOU CAN FIND
ADDITIONAL INFORMATION 7
DILUTION 7 3,750,000 Shares Common Stock
USE OF PROCEEDS 8 $8.00 per share
SELECTED FINANCIAL
DATA 11 ----------------------------
MANAGEMENT'S DISCUSSION
AND ANALYSIS OR PLAN OF
OPERATION 11 Until ___________, 1999, all
BUSINESS 12 transactions in the registered
MANAGEMENT AND AFFILIATES 17 securities, whether or not
PRINCIPAL SHAREHOLDERS 20 participating in this distribution,
CERTAIN RELATIONSHIPS may be required to deliver a
AND RELATED TRANSACTIONS 20 prospectus. This is in addition to
DESCRIPTION OF SECURITIES 21 the obligation of dealers to deliver
LEGAL MATTERS 23 a prospectus should be read in its
PLAN OF DISTRIBUTION 22 entirety by any prospective investor
EXPERTS 24 prior to his or her investment.
CHANGE IN INDEPENDENT ACCOUNTANTS 24
HOW TO INVEST IN R-TEC 24
FINANCIAL STATEMENTS F-1
<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 regarding shareholder loans dated June 1, 1999.
16.00+ Letter regarding change in certifying accountants.
23.0 Consent of James Moore & Co., L.P.
* Previously filed
+ To be filed by amendment
II-1
<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
Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the undersigned Registrant hereby undertakes to
file with the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred to that section.
(a) The Registrant hereby undertakes to:
1. To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3)of the
Securities Act;
(ii) Reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information 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 Securities and Exchange 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; and to
(iii) 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.
2. For determining liability under the Securities Act 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 that remain unsold at the termination of the
offering.
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.
(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>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-1 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
New York, State of New York, on June 11, 1999.
R-Tec Technologies, Inc.
/s/
- ------------------------
Philip Lacqua
Director, President, Chief Executive Officer, Chief Financial Officer,
Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Signatures Title Date
_____/s/___________ Director, President June 11, 1999
Philip Lacqua Treasurer
_____/s/___________ Director, Vice President June 11, 1999
Nancy Vitolo and Secretary
_____/s/___________ Director, Vice President June 11, 1999
Marc M. Scola and General Counsel
________________ Director June __, 1999
Damon E. Palmer
________________ Director June __, 1999
Shawn P. Walsh
II-4
BRASHEAR & ASSOCIATES, P.L.
926 N.W. 13th Street
Gainesville, FL 32601
June 11, 1999
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549
Re: Registration Statement on Form S-1
R-Tec Technologies, Inc.
Ladies and Gentlemen:
We have acted as special counsel to R-Tec Technologies, Inc., a New
Jersey corporation (the "Company"), in connection with the public offering of up
to 3,750,000 common shares (the "Common Shares").
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended
(the "1933 Act").
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
such documents as we have deemed necessary or appropriate as a basis for the
opinions set forth herein, including (i) the Registration Statement of the
Company on Form S-1 relating to the Common Shares, filed with the Securities and
Exchange Commission (the "Commission") on June 11, 1999 (the "Registration
Statement"); (ii) the Articles of Incorporation and the Bylaws of the Company,
as amended to date; (iii) the form of voting Common Stock Certificate; (iv)
copies of certain resolutions (the "Resolutions") adopted by the Board of
Directors of the Company relating to the issuance of the Common Shares, the
filing of the Registration Statement and any amendments or supplements thereto
and related matters; and (v) such other documents as we have deemed necessary or
appropriate as a basis for the opinions set forth below.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of all natural persons, the authenticity of all documents
submitted to me as originals, the conformity to original documents of all
documents submitted to me as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed by parties other than the Company, we have
assumed that such parties had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents and the validity and binding effect thereof. As to any
facts material to the opinions expressed herein which were not independently
established or verified, we have relied upon oral or written statements and
representations of officers and other representatives of the Company and others.
<PAGE>
Based on such examination, we are of the opinion that:
1. The Common Shares have been duly and validly authorized and, when
certificates therefor have been duly authenticated, delivered and paid for in
accordance with all applicable laws and agreements, will be duly and validly
issued, fully paid and nonassessable.
We consent to the use of this firm's name under the caption "Legal
Matters" in the Registration Statement, and to the filing of this opinion as an
exhibit to the Registration Statement. By giving you this opinion and consent,
we do not admit that we are experts with respect to any part of the Registration
Statement within the meaning of the term "expert" as used in Section 11 of the
1933 Act, or the rules and regulations promulgated thereunder, nor do we admit
that we are in the category of persons whose consent is required under Section 7
of the 1933 Act.
Sincerely,
BRASHEAR & ASSOCIATES, P.L.
/S/ Bruce Brashear
Bruce Brashear, Esq.
PROMISSORY NOTE
$75,857.00 Warren County, New Jersey
Six Percent (6.0%) May 10, 1999
FOR VALUE RECEIVED, the undersigned and maker of this Note, NANCY
VITOLO promises to PAY TO THE ORDER OF R-TEC TECHNOLOGIES, INC. at the address
of 61 Mallard Drive, P.O. Box 221, Allamuchy, New Jersey 07821 (the "holder")
the sum of Seventy Five Thousand Eight Hundred Fifty Seven Dollars ($75,857.00)
at Six Percent (6.0%) per annum payable as follows:
$75,857.00 within ninety (90) days of the completion of the Companys
Initial Public Offering.
ADDRESS OF MAKER: The undersigned represents and warrants that the
undersigned is located at 290 Green Road, Sparta, New Jersey, and agrees to
notify the holder of any change of residence within 10 days of such change.
WAIVERS: The undersigned hereby waives (1) presentment, demand,
protest, notice of dishonor and/or protest and notice of nonpayment; (2) the
right, if any, to the benefit of, or to direct the application of, any security
hypothecated to the holder until all indebtedness of the undersigned to the
holder, howsoever arising, shall have been paid; and (3) the right to require
the holder to proceed against or to pursue any remedy against any party other
than the undersigned.
INSOLVENCY: It is agreed that if the undersigned, at any time fail
in business or become insolvent, or commit an act of bankruptcy, or if any
deposit account or other property of the undersigned be attempted to be obtained
or held by writ of execution, garnishment, attachment or other legal process, or
if any assessment for taxes against the undersigned other than taxes on real
property, is made by the federal or state government, or any department thereof,
or if the undersigned fails to notify the holder of any material change in its
financial condition, then in such case all of the obligations of the undersigned
shall, at the option of the holder, become due and payable immediately without
demand or notice.
WARRANTY OF RECEIPT OF VALUE: The undersigned does hereby expressly
represent and warrant to the holder with the intent that the holder rely on such
representation and warranty as a specific inducement to the making of this
instrument, that the undersigned have received full value for this note.
<PAGE>
Promissory Note/Nancy Vitolo/R-Tec Technologies, Inc./Page Two
ASSIGNABILITY: This note shall be assignable only by the holder
provided that such assignment shall not impair or enlarge the obligations of the
undersigned. The undersigned shall not assign obligations under this note to any
third party without the written consent of the holder.
LAW GOVERNING: This Promissory Note shall be governed by the laws of
the State of New Jersey and the undersigned do hereby voluntarily submit
generally to the jurisdiction of the courts of New Jersey should it become
necessary for the holder hereof to enforce any of his rights under the terms
hereof.
DEFAULT: The maker also agrees to pay all costs and expenses
incurred by the holder hereof, including all reasonable attorneys' fees for the
collection of this Note and the indebtedness evidenced hereby, or the
enforcement of the holder's rights hereunder or under any other instruments
creating any collateral security or guaranty now or hereinafter given to secure
this loan.
The maker acknowledges that the $75,857.00 of this Note represents
the balance of my capital contribution to the company.
ACCELERATION: The maker further agrees that if the Corporation
is subsequently sold or transferred, all payments due and owing under this Note
will become due at the time of the subsequent sale.
Attested By:
_______________________ By:_____________________________
NANCY VITOLO, Individually
Dated: May 10, 1999
PROMISSORY NOTE
---------------
$ 850,000.00 Warren County, New Jersey
Six Percent (6.0%) May 10, 1999
FOR VALUE RECEIVED, the undersigned and maker of this Note, R-TEC
TECHNOLOGIES, INC. promises to PAY TO THE ORDER OF MURIAL KAISER at the address
of 290 Green Road, Sparta, New Jersey 07871 (the "holder") the sum of Eight
Hundred Fifty Thousand Dollars ($850,000.00) at Six Percent (6.0%) per annum
payable in full within thirty (30) days of the completion of the funding of the
initial public offering.
ADDRESS OF MAKER: The undersigned represents and warrants that the
undersigned is located at 61 Mallard Drive, Allamuchy, New Jersey, and agrees to
notify the holder of any change of residence within 10 days of such change.
WAIVERS: The undersigned hereby waives (1) presentment, demand,
protest, notice of dishonor and/or protest and notice of nonpayment; (2) the
right, if any, to the benefit of, or to direct the application of, any security
hypothecated to the holder until all indebtedness of the undersigned to the
holder, howsoever arising, shall have been paid; and (3) the right to require
the holder to proceed against or to pursue any remedy against any party other
than the undersigned.
INSOLVENCY: It is agreed that if the undersigned, at any time fail
in business or become insolvent, or commit an act of bankruptcy, or if any
deposit account or other property of the undersigned be attempted to be obtained
or held by writ of execution, garnishment, attachment or other legal process, or
if any assessment for taxes against the undersigned other than taxes on real
property, is made by the federal or state government, or any department thereof,
or if the undersigned fails to notify the holder of any material change in its
financial condition, then in such case all of the obligations of the undersigned
shall, at the option of the holder, become due and payable immediately without
demand or notice.
WARRANTY OF RECEIPT OF VALUE: The undersigned does hereby expressly
represent and warrant to the holder with the intent that the holder rely on such
representation and warranty as a specific inducement to the making of this
instrument, that the undersigned have received full value for this note.
<PAGE>
Promissory Note/R-Tec Technologies, Inc./Vitolo/Page Two
ASSIGNABILITY: This note shall be assignable only by the holder
provided that such assignment shall not impair or enlarge the obligations of the
undersigned. The undersigned shall not assign obligations under this note to any
third party without the written consent of the holder.
LAW GOVERNING: This Promissory Note shall be governed by the laws of
the State of New Jersey and the undersigned do hereby voluntarily submit
generally to the jurisdiction of the courts of New Jersey should it become
necessary for the holder hereof to enforce any of his rights under the terms
hereof.
DEFAULT: The maker also agrees to pay all costs and expenses
incurred by the holder hereof, including all reasonable attorneys' fees for the
collection of this Note and the indebtedness evidenced hereby, or the
enforcement of the holder's rights hereunder or under any other instruments
creating any collateral security or guaranty now or hereinafter given to secure
this loan.
The maker acknowledges that the $850,000.00 of this Note represents
the purchase of the Patent entitled "Composition for the Detection of
Electrophlic Gases and Methods of Use Thereof" GSEN 3.0-001, Serial No.
08/837355.
ACCELERATION: The maker further agrees that if the Corporation is
subsequently sold or transferred, all payments due and owing under this Note
will become due at the time of the subsequent sale.
Attested By: R-TEC TECHNOLOGIES, INC.
_______________________ By:__________________________L.S.
MARC M. SCOLA, PHILIP LACQUA,
Vice President and President
General Counsel
Dated: May 10, 1999 Dated: May 10, 1999
Prepared By:
----------------------
Marc M. Scola, Esq.
RELEASE
This Release, dated May 10, 1999 is given
BY the Releasor(s) MURIEL KAISER, having an address at 10110 Boynton Place
Circle, Boynton Beach, Florida 33437
TO R-TEC TECHNOLOGIES, INC., having an address at 61 Mallard Drive, P.O. Box
282, Allamuchy, New Jersey 07820.
If more than one person signs this Release, "I" shall mean each person who signs
this Release.
1. RELEASE. I release and give up any and all claims and rights which I may have
in a Patent entitled "Composition for the Detection of Electrophlic Gases and
Methods of Use Thereof", GSEN 3.0-001, Serial No. 08/837355, filed in the United
States and Foreign Countries and any amendments thereto. This releases all
claims including those of which I am not aware and those not mentioned in this
release. This release applies to claims resulting from anything which has
happened up to now. I specifically release the following:
2. PAYMENT. I will receive a total of $850,000.00, in full payment for making
this Release. I agree that I will not seek anything further including any
other payment from you.
3. WHO IS BOUND. I am bound by this Release. Anyone who succeeds to my rights
and responsibilities, such as my heirs or executor of my estate, is also bound.
This Release is made for your benefit and all who succeed to your rights and
responsibilities, such as your heirs or the executors of your estate.
4. SIGNATURES. I understand and agree to the terms of this release. If this
release is made by a corporation, its proper corporate officers sign and its
corporate seal is affixed.
<PAGE>
Witnessed and Attested by:
- --------------------------- --------------------------
MURIEL KAISER
STATE OF FLORIDA, COUNTY OF PALM BEACH, SS:
I CERTIFY that on May ___, 1999
MURIEL KAISER personally came before me and acknowledged under oath, to my
satisfaction, that this person or persons: (a) is named in and personally signed
this document; and (b) signed, sealed and delivered this document as his or her
act and deed.
-----------------------------
A Notary Public of the
State of Florida
RESOLUTION
----------
ADOPTED BY BOARD OF DIRECTORS OF
--------------------------------
R-TEC TECHNOLOGIES, INC.
------------------------
A NEW JERSEY CORPORATION
------------------------
WHEREAS, there being a special meeting of the board of directors of
R-Tec Technologies, Inc. on June 1, 1999, to take certain steps to transact such
business as it shall deem necessary and proper.
1. The Board voted and authorized the confirmation of the following
information:
Patent Agreement:
-----------------
1. Agreement dated May 19, 1999, with Muriel Kaiser, STATUS:
Replaced by #2.
2. Agreement dated May 10, 1999, with Muriel Kaiser, STATUS: In Force.
Promissory Note Payable - Patent:
- ---------------------------------
3. Promissory Note dated December 1, 1998, to Nancy Vitolo & Muriel Kaiser
$4,000,000.00, STATUS: Replaced by #4.
4. Promissory Note dated April 14, 1999 to Muriel Kaiser, $425,000.00,
STATUS: Replaced by #5.
5. Promissory Note dated May 10, 1999 to Muriel Kaiser, $850,000.00
STATUS: In Force.
1
<PAGE>
Notes Payable to Stockholders:
- ------------------------------
6. Promissory Note dated January 6, 1999, from Marc M. Scola, $75,000.00,
STATUS: Replaced by #8.
7. Promissory Note dated January 6, 1999, from Marc M. Scola, $29,840.22,
STATUS: Replaced by #9
8. Promissory Note dated April 22, 1999, from Marc M. Scola, $37,500.00,
STATUS: Amount converted to capital and note was canceled.
9. Promissory Noted dated April 22, 1999, from Marc M. Scola, $14,920.11,
STATUS: Amount converted to capital and note was canceled.
10. Promissory Note dated January 6, 1999, from Philip Lacqua, $203,000.00,
STATUS: Replaced by #11.
11. Promissory Note dated April 22, 1999, from Philip Lacqua, $101,500.00,
STATUS: Amount converted to capital and note was canceled.
12. Promissory Note dated April 22, 1999, from Nancy Vitolo, $61,000.00,
STATUS: Amount converted to capital and note was canceled.
WHEREAS, the above items on the agenda were put to a vote and it
carried unanimously.
WHEREAS, the current stockholders and directors of the corporations
and their respective percentages of issued and outstanding stock voted as
follows:
2
<PAGE>
STOCKHOLDERS
------------
NAME PERCENTAGE VOTES
---- ---------- -----
Nancy Vitolo 33.33% Unanimous
Philip Lacqua 33.33% Unanimous
Marc M. Scola 33.33% Unanimous
NOW, THEREFORE, be it RESOLVED:
DIRECTORS
---------
VOTES
NAME OFFICE IN FAVOR
---- ------ --------
Nancy Vitolo Secretary/Director Unanimous
Philip Lacqua President/Treasurer/
Director Unanimous
Marc M. Scola Vice President/Director
and General Counsel Unanimous
Damon E. Palmer Director Unanimous
Shawn Walsh Director Unanimous
BE IT RESOLVED that the transaction herein referred to, being
herewith approved, the President and Secretary of this Corporation be and they
are hereby directed, authorized and empowered to execute, acknowledge and
deliver such instruments and papers and perform such acts as may be legally,
properly and reasonably required or necessary for the purpose of changing the
corporate records.
3
<PAGE>
I, Marc M. Scola, Vice President and General Counsel of R-Tec
Technologies, Inc., a Corporation of the State of New Jersey, certify that the
foregoing is a true copy of a resolution as it appears in the records of the
corporation and was duly and legally adopted at a special meeting of the Board
of Directors of the corporation called for that purpose and held on June 1,
1999, pursuant to and in accordance with the By-laws of said Corporation.
R-Tec Technologies, Inc.
By:______________________________
Dated: June 1, 1999 Marc M. Scola
Vice President & General Counsel
4
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 & COMPANY, P.L.
Gainesville, Florida
June 10, 1999
