Filed Pursuant to Rule 424(b)(3)
Registration No. 333-72405
Prospectus
R-Tec Technologies, Inc.
3,750,000 Shares Common Stock
$8.00 per share
- -----------------------------------------------------------------------------
<PAGE>
R-Tec owns patented paints and The proceeds of stock sales will be
other coating technologies which held in escrow by the Bank of New York
detect leaks from freon and other and paid to R-Tec only if:
gases by changing color. We
intend to sell the paints and to o at least 625,000 shares are sold,
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 date of
This is our initial public offering. the prospectus, if extended by R-Tec.
There is currently no public market
for the common stock.
All of the shares to be sold in the Otherwise all subscriptions will be
offering are being sold by officers returned to you with interest.
and directors of R-Tec on a "best
efforts" basis. We may sell some
units through qualified selling agents.
The Offering
- ------------
Possible
Public Price Commissions Total to R-Tec
Per Share....................... $ 8.00 $ .80 $ 7.20
Proceeds to R-Tec from
Minimum Offering............. $5,000,000.00 $ 500,000.00 $ 4,500,000.00
Proceeds to R-Tec from
Maximum Offering............. $30,000,000.00 $3,000,000.00 $27,000,000.00
This investment involves a high degree of risk. You should purchase shares only
if you can afford a complete loss. See "Risk Factors" beginning on page 5 for
specific risks involved in this offering.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is August 5, 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 .................................................... 21
Certain Relationships and
Related Transactions.................................................... 21
Description of Securities.................................................. 22
Plan of Distribution ...................................................... 23
Legal Matters.............................................................. 25
Experts.................................................................... 25
Change in Independent Accountants.......................................... 25
How to Invest in R-Tec..................................................... 26
Financial Statements...................................................... F-1
2
<PAGE>
Prospectus Summary
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully, including the "Risk Factors"
section and the financial statements and the notes to those statements.
R-Tec Technologies, Inc.
R-Tec Technologies, Inc. was formed in October, 1998 for the purpose of
developing, manufacturing, selling and licensing our proprietary technology
for detecting gas leaks. R-Tec has not yet commenced commercial operations. We
presently do not own our own facilities to produce our products, although we
have a contract with a manufacturer, Anscott Chemical Corp. We do not have
commercial quantities of our products. The efficacy of our product, R-Tect 22,
has been confirmed by an independent third-party, Motors & Armatures Corp. which
tested the product and its formulations and found that they meet Motors &
Armatures' standards for commercial leak testing of critical charge
refrigeration and air conditioning systems. Motors & Armatures' standards for
leak testing might not be the same as testing standards used by other
third-parties and potential customers. To date, R-Tec has devoted all of its
energies to its initial organization, product research and development,
developing a business plan, fund raising efforts and to primarily preparing the
documentation related to this offering.
R-Tec's proprietary technology is protected by a patent which is owned by
R-Tec. The patent was purchased with a note payable in the amount of $850,000.
The patent is collateral for the note.
We have developed three gas detecting paints. The paints change color when
gas escapes through the coated junction allowing for rapid detection of gas
leaks. We believe our existing products have broad application in areas such as
the manufacture and installation of air conditioning and refrigeration systems.
We plan to use these technologies to develop more gas detecting paints and
other products that will be used in a variety of industrial and manufacturing
settings to coat pipe junctions. Examples of such products are a carbon dioxide
reactive paint product which exists in prototype form, designed to detect
carbon dioxide leaks, a natural gas detection reactive paint which exists in
prototype form and a propane leak detection reactive paint product which has
not been developed. In addition to the propane leak detection reactive paint
product, we hope to develop leak detection systems for other gases, such as
ammonia, butane, using our patented technology. R-Tec's detection technology
potentially could be used to measure blood gases, to measure the freshness of
packaged poultry, and to detect gas leaks in electrical transformers. At
present, we have not taken steps to determine feasibility of other potential
applications of our technology. Sale of the minimum number of shares offered
would reduce the number of products which R-Tec can develop and produce.
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The Offering
------------
Common Stock Offered......................Minimum - 625,000 shares
Maximum - 3,750,000 shares
Offering Price............................$8.00 per share
Total Number of
Shares Outstanding
After the Offering
(assuming all offered
shares are sold)..........................18,750,000 shares
Total Number of
Shares Outstanding
After the Offering
(assuming the minimum
number of shares offered
are sold).................................15,625,000 shares
Estimated Net Proceeds
(assuming the minimum
number of shares offered
are sold).................................$4,000,000
Estimated Net Proceeds
(assuming all offered
shares are sold)..........................$26,500,000
Use of Proceeds...........................We intend to use the net proceeds
of this offering to 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
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Risk Factors
Investing in our common stock involves a high degree of risk. In addition to
the other information in this document, you should carefully consider the
following risk factors in evaluating an investment in our common stock.
If We Sell Only 625,000 Shares, You Might Lose Your Entire Investment Due To Our
Cash Shortage.
If only 625,000 shares are sold, R-Tec may not have sufficient capital to
fund operations past 24 months, without revenues. In addition, R-Tec may be
unable to find additional suitable financing sources on acceptable terms.
Therefore, if the minimum number of shares are sold, R-Tec may not have
sufficient funds to operate after 24 months and we may not be able to undertake
additional projects or operations described in this prospectus. This could
result in your losing all of your investment.
R-Tec Is A Start-Up Company With Limited Operating History.
There is absolutely no assurance that we will be able, upon completion of
this offering, to successfully implement our proposed business plan or that
R-Tec will ever operate profitably. R-Tec was only recently incorporated, has
no significant assets other than a patent. R-Tec has no current substantial
business operations nor any history of operations and is considered to be a
development stage enterprise.
All Of Our Products Are New And May Not Be Commercially Feasible.
R-Tec may also experience difficulties that could delay or prevent the
development, introduction and marketing of its products. R-Tec will be
dependent upon products that will be developed in commercial quantities in the
future. If we are unable on a timely basis to develop new products or
enhancements to existing products, or if our products do not achieve market
acceptance or commercial success, our business, operational results and
financial condition will be materially adversely affected and investors could
lose their entire investment. Since our products have never been produced in
commercial quantities, there can be no assurance that commercial production will
be feasible. Even if feasible, there can be no assurance that our products will
perform as intended.
If Our Products Fail To Operate Properly, We Will Be Subject To Significant
Liability.
Our products are designed to avoid significant dangers, such as natural gas
leaks. If our products do not function properly and property or personal injury
occurs as a result of gas leaks which should have been detected by our products,
R-Tec may incur significant liability which R-Tec may be unable to pay.
We Do Not Have Our Own Production Facilities At This Time To Produce Our
Products And Our Office Space Is Inadequate For Future Needs.
At the present time we do not have our own facility to produce the paints
which are our principal products. In addition, our present office space is
inadequate for future needs.
Shareholders May Be Unable To Sell Stock Since There Is No Active Market At
Present.
No public market exists for R-Tec's common stock. You may not be able to
sell your shares promptly or at all, or sell your shares at a price equal to or
above the price you paid for the shares due to the lack of an active market at
present. There can be no assurance that any market will develop for the
securities or that if a market does develop, that it will continue. If we are
unable to qualify for the NASDAQ Small Cap Market listing, we believe that our
stock will trade on over-the-counter market on the OTC Bulletin Board.
Consequently, selling your common stock would be more difficult, transactions
could be delayed, and security analysts' and news media's coverage of R-Tec may
be reduced. These factors could result in lower stock prices.
R-Tec's Business Is Dependent On Patent Protection Which Cannot Be Assured.
R-Tec holds a patent on its technology. There can be no assurance
that patent, trade secret or copyright laws will protect our technologies or
that we will not be vulnerable to competitors who attempt to copy or use our
products or processes.
There Is A Risk That Our Products Will Not Work As Intended.
We have never produced any commercial quantities of our products and they
have never been tested by consumers. There is no assurance that our products
will work for consumers as intended and no assurance can be given that our
products will not cause damage which will result in liability for R-Tec. If
our products are not commercially viable, we could have insufficient
5
<PAGE>
funds to operate which could result in our terminating operations.
Management Has Broad Discretion In The Use of Proceeds Of This Offering.
Management has broad discretion in the use of proceeds and the allocations
set forth are only estimates, subject to adjustment in the opinion of
management based on events which may arise in the future.
Present Stockholders Will Derive Greater Benefits If We Are Successful And Have
Less Risk.
Present stockholders will benefit from a disproportionately greater share of
R-Tec, if successful, while investors in this offering risk a disproportional
greater loss of cash invested if R-Tec is not successful. Three of our officers
and directors collectively have given total consideration of $540,000 for the
15,000,000 presently outstanding shares of R-Tec's common stock. Investors in
this offering will pay a total purchase price of $30,000,000, assuming all
3,750,000 shares are sold. The officers and directors will own 80% of the
outstanding shares and investors in this offering will own 20% of the
outstanding shares.
Some of R-Tec's Competitors May Be Larger And Better Financed.
R-Tec's products will compete with electronic and other devices which are
designed to detect gas leaks. Some of these competitors have greater financial,
marketing and manufacturing resources. This, together with the limited capital
available to R-Tec which will limit its marketing efforts, creates a
significant competitive disadvantage. If we are not able to compete
successfully, regardless of the quality of our products and the success of this
offering, we will have little chance of succeeding and it is likely investors
will lose their entire investment.
Since R-Tec Has No Underwriter There Is A Greater Risk That No Market Will
Develop For Our Stock.
Lack of an underwriter or broker/dealer participation in the offering is
likely to increase the risk that no market for our securities will develop upon
completion of the offering. Because R-Tec has not engaged the services of an
underwriter, the independent due diligence review of R-Tec, its affairs and
financial condition, which would ordinarily be performed by an underwriter,
have not been performed.
If R-Tec's Common Stock Becomes Subject To The Penny Stock Rules, Investors May
Find It More Difficult To Sell Their Securities.
If the trading price, if any, of the common stock were to fall below $5.00
per share, trading in the common stock would be subject to rules promulgated
under the Exchange Act of 1934. This could severely limit the liquidity of the
common stock and the ability of investors in this offering to sell the common
stock in the secondary market. Those rules require additional disclosure by
broker-dealers in connection with any trades involving a stock market price of
less than $5.00 per share. These rules require the delivery of a disclosure
schedule explaining the penny stock market and the risks associated therewith.
Delivery must occur prior to any transaction. Additional sales practice
requirements are imposed on broker-dealers who sell penny stocks to persons
other than established customers and accredited investors. For these types of
transactions, the broker-dealer must make a special suitability determination
for the investor and must have received the investor's written consent to the
transaction prior to sale. The broker-dealer also must disclose the commissions
payable to the broker-dealer, and current bid and offer quotations for the
penny stock. If the broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. This information must be provided to the customer orally or in writing
prior to effecting the transaction and in writing before or with the customer
confirmation. Monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. The additional burdens imposed upon
broker-dealers by these requirements may discourage them from effecting
transactions in the common stock.
We May Be Unable To Sell Stock In Some States Due To The Inability To Comply
With Blue Sky Regulations.
Since R-Tec is not using an underwriter, we must register our officers and
directors in some states in which we seek to sell our common stock. There can
be no assurance that any or all stock registrations in various states will be
approved. If registration is not approved, it will be more difficult for us to
sell the minimum number of shares.
Our Offering Price Has Been Arbitrarily Determined
We have unilaterally and arbitrarily determined the offering price. The
value of the common stock as determined by any subsequent market for the common
stock may be may much less than the price paid by you .
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<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 obtained worldwide recognition with its global patent which was filed
in 104 countries. In fact, the recognition referred to was R-Tec's patent
application which was filed in 96 countries. The press release statement that
R-Tec's products were "revolutionary" and its technology instrumental in
reducing CFC emissions and global warming were based on the opinions of Shawn P.
Walsh, a consultant to R-Tec and a director. However, R-Tec's products are not
yet in consumer use and have never been instrumental in reducing CFC emissions
or global warming. The press release also stated inaccurately that Underwriters
Laboratories were unable to produce a standard for R-Tec's technology because it
is so advanced. In fact, Underwriters Laboratories stated that it did not have a
published standard with which to evaluate R-Tec's R-Tect 22 product due to the
uniqueness of this product. Finally, the reference in the press release to a
contact by Deputy Commissioner of New York City Environmental Protection Agency
failed to indicate that his evaluation of R-Tec's products was based on
statements made to him by R-Tec concerning the product's performance and
efficacy.
Where You Can Find Additional Information
In connection with the offering of the common stock, R-Tec has filed
a registration statement with the Securities and Exchange Commission. There is
additional information concerning R-Tec contained in the registration statement
that is not contained in this prospectus. In addition, beginning with the
effective date of this prospectus, we will be required to file annual quarterly
and special reports and proxy statements with the SEC. You may read and copy any
document we file at the SEC's- Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or may view them on the SEC worldwide web site at
<http://www.sec.gov\edgar>. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the Public Reference Room. You may request a
copy of our SEC filings, at no cost, by writing R-Tec Technologies, Inc., 61
Mallard Drive, P.O. Box 282, Allamuchy, New Jersey 07820.
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>
<S> <C> <C> <C> <C>
3,750,000 2,500,000 1,250,000 625,000
shares sold shares sold shares sold shares sold
----------- ----------- ----------- -----------
Assuming a public offering price of $8.00 $8.00 $8.00 $8.00
Net proceeds to R-Tec $26,500,000 $17,500,000 $8,500,000 $4,000,000
Net tangible book deficit per share
for existing shareholders before
offering $(0.057) $(0.057) $(0.057) $(0.057)
Increase per share attributable to
payment of shares purchased by new
investors $1.42 $1.01 $0.53 $0.26
Pro forma net tangible book value
after offering $1.37 $.95 $0.47 $0.20
Dilution per share to new investors $6.63 $7.05 $7.53 $7.80
</TABLE>
The following chart illustrates the pro-forma proportionate
ownership in R-Tec, upon completion of the offering of present stockholders and
of investors in this offering, compared to the relative amounts paid and
contributed to capital of R-Tec by present stockholders and by investors in this
offering, assuming no changes in net tangible book value other than those
resulting from the offering.
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<TABLE>
<CAPTION>
Shares Issued Total Consideration Average Price
<S> <C> <C> <C> <C> <C>
Number Percent Amount Percent Per Share
------ ------ ----- ------ -------------
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
o sold by officers and directors of R-Tec, funds now allocated for commissions
will be used for research and development.
The proceeds of this offering will be used to pay:
o Research and development expenses, which consist of the salaries of our
scientists, the cost of equipment, supplies, leasing laboratory space and
purchase or construction of a laboratory.
o Office expenses which consist of expenses for executive offices, purchase or
construction of a building, and lease of warehouse space.
o Parts and supplies expenses which consist of the cost of raw materials and
inventory.
o Salary expenses, which consist of the salaries of R-Tec's officers and
directors, internal accounting, administrative and other personnel.
o Sales and marketing expenses, which consists of advertising and public
relations costs.
o Patent expenses, which consists of the payment due for the patent.
o Insurance expense consists of the cost of general liability, officers and
directors liability, life, health, workers' unemployment compensation and
automobile insurance.
The chart below represents the use of proceeds if the maximum number of
shares offered is sold. Sale of all the shares offered would provide sufficient
funds for R-Tec to operate 48-60 months without revenue.
ESTIMATED
PERCENT OF
PURPOSE AMOUNT PROCEEDS
- ------- ------ ----------
Research and Development Activities $ 7,011,080 26.46%
Salary Expense 5,485,000 20.70%
Parts and Supplies Expense 3,700,000 13.96%
Office Expense 6,253,920 23.60%
Sales and Marketing Expense 2,000,000 7.55%
Patent Cost 850,000 3.21%
Travel Expense 500,000 1.89%
Insurance Expense 700,000 2.64%
------- -----
TOTAL $26,500,000 100%
Offering Expenses 500,000
Possible Commissions 3,000,000
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The chart below represents the use of proceeds if $20,000,000.00 of common
stock is sold. Sale of 2,500,000 of the shares offered would provide sufficient
funds for R-Tec to operate 36 to 48 months without revenue.
ESTIMATED
PERCENT OF
PURPOSE AMOUNT PROCEEDS
- ------ ------ ----------
Research and Development Activities $ 4,986,080 28.49%
Salary Expense 4,485,000 25.63%
Parts and Supplies Expense 1,800,000 10.29%
Office Expense 3,653,920 20.88%
Patent Cost 850,000 4.86%
Sales and Marketing Expense 1,000,000 5.71%
Travel Expense 200,000 1.14%
Insurance Expense 525,000 3.00%
------- -----
TOTAL $17,500,000 100%
Offering Expenses 500,000
Possible Commissions 2,000,000
The chart below represents the use of proceeds if $10,000,000 of common
stock is sold. Sale of 1,250,000 of the shares offered would provide sufficient
funds for R-Tec to operate 24 to 36 months without revenue.
ESTIMATED
PERCENT OF
PURPOSE AMOUNT PROCEEDS
- ------- ------ ----------
Research and Development Activities $ 1,161,080 13.66%
Salary Expense 2,885,000 33.94%
Parts and Supplies Expense 800,000 9.41%
Office Expense 1,853,920 21.81%
Patent Cost 850,000 10.00%
Sales and Marketing Expense 500,000 5.88%
Travel Expense 100,000 1.18%
Insurance Expense 350,0000 4.12%
-------- -----
TOTAL $ 8,500,000 100%
Offering Expenses 500,000
Possible Commissions 1,000,000
The chart below represents the use of proceeds if the minimum number of
shares offered are sold. In the event the minimum number of shares offered
were sold, Mr. Scola, Mr. Lacqua and Ms. Vitolo would defer a portion of their
salaries until sufficient funds were available. Sale of the minimum number
shares offered would provide sufficient funds for R-Tec to operate 24 months
without revenue.
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ESTIMATED
PERCENT OF
PURPOSE AMOUNT PROCEEDS
- ------- -------- ----------
Research and Development Activities $684,920 17.12%
Salaries Expense 1,485,000 37.13%
Parts and Supplies Expense 226,160 5.56%
Office Expense 353,920 8.85%
Sales and Marketing Expense 200,000 5.00%
Patent Cost 850,000 21.25%
Travel Expense 50,000 1.25%
Insurance Expense 150,000 3.75%
------- -----
TOTAL $ 4,000,000 100%
Offering Expenses 500,000
Possible Commissions 500,000
The foregoing represents management's current estimate of how the proceeds
of this offering will be used and is subject to change based on changing
circumstances and differing needs of R-Tec as they may exist in the future.
R-Tec may reallocate the proceeds in the above described categories or to other
purposes in response to changes in its plans, industry conditions, and R-Tec's
future revenues and expenditures.
We believe that the net proceeds from the sale of the common stock offered
assuming that all shares offered are sold, will provide R-Tec sufficient
capital to fund initial operations, development and expansion of business for
approximately the first 48 to 60 months following completion of this offering.
If only the minimum is sold, R-Tec believes it will be able to operate for 24
months if no revenue is generated from its operations. Many factors may affect
R-Tec's cash needs, including the possible failure to develop sufficient
revenues from the sale of its products. R-Tec may not have sufficient capital
for its funding requirements and may be unable to find suitable financing on
acceptable terms. If R-Tec is unable to obtain such additional financing, our
ability to maintain our level of operations could be materially adversely
affected and R-Tec may not succeed. This event would significantly increase the
risk of loss to those persons who invest in this offering.
A portion of the proceeds will be used to pay a promissory note executed in
payment for the patent which underlies our patented technology. Under the terms
of this note $850,000 is payable within 30 days of completion of this offering.
The note bears interest at the rate of 6% per annum.
Any portion of the net proceeds not required for immediate expenditure will
be deposited in R-Tec's corporate checking account, interest-bearing accounts
or invested in short-term government notes, treasury bills, or short-term
obligations of financial institutions.
We reserve the right to change the use of proceeds in the event that we
determine based on our marketing efforts and research and testing of our
products that an adjustment in the proceeds of this offering is warranted in the
opinion of management. However, there will be no adjustment in any amounts
utilized to pay promissory note and patent expense.
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Selected Financial Data
R-Tec is a development stage company and has no revenues or earnings from
operations.
March 31, 1999 December 31, 1998
(unaudited)
Total Assets $1,031,863 $904,500
Total Liabilities 885,336 821,147
Stockholders Equity 146,527 83,353
Net Tangible Book Value (852,437) (776,647)
Net Tangible Book Value per share $ (0.057) $(0.052)
Management's Discussion and Analysis or Plan of Operation
The following discussion and analysis should be read in conjunction
with R-Tec's financial statements and the Notes associated with them contained
elsewhere in this prospectus. This prospectus contains forward-looking
statements that involve risks and uncertainties. R-Tec's actual results may
differ significantly from the result discussed in the forward looking
statements. Factors that might cause such a difference are discussed in "Risk
Factors."
Overview
R-Tec has patented technology for coatings such as paint and other
products which may be used to detect leaks of various gases from pipes. We
believe that our R-Tect 12 reactive paint, R-Tect 22 reactive paint and R-Tect
carbon dioxide reactive paint products are ready for commercial production and
we have an order for R-Tect 22 reactive paint.
From its inception in 1998, R-Tec has been engaged primarily in
activities devoted towards obtaining the patent rights to the technology,
general business operations, negotiating license agreements and obtaining
financing for this offering. There have been no revenues to date.
Results of Operations
It is difficult for R-Tec to forecast its revenue or earnings
accurately. We believe that period-to-period comparisons of our operating
results may not be meaningful.
As a result of our extremely limited operating history, we do not
have historical financial data for a significant number of periods on which to
base planned operating expenses. Our expense levels are based upon our
expectations concerning future revenue. Thus, quarterly revenue and results of
operation are difficult to project.
Liquidity and Capital Resources
R-Tec has incurred negative cash flows from operation since its
inception. We expect to continue to expend substantial sums to complete product
development, to create inventory and to begin marketing and sales.
Our future capital requirements and the adequacy of available funds
will depend on numerous factors, including the successful commercialization of
the R-Tect 22, R-Tect 12 and R-Tect carbon dioxide reactive paint products,
progress in its product development efforts, the magnitude and scope of such
efforts, the cost of contract manufacturing, cost of filing, prosecuting,
defending and enforcing patent claims and other intellectual property rights,
competing technological and market developments, and the development of
strategic alliances for the development and marketing of our products. R-Tec
requires the minimum proceeds of this offering to meet its planned operating
requirements through June 30, 2001. In the event R-Tec's plans change or its
assumptions change or prove to be inaccurate or the proceeds of the offering
prove to be insufficient to fund operations at the planned level (due to further
unanticipated expenses, delays, problems or otherwise), R-Tec could be required
to obtain additional funds in any event through equity or debt financing,
strategic alliances with corporate partners and others, or through other sources
in order to bring its products through regulatory approval to commercialization.
The terms and prices of any equity or debt financings may be significantly more
favorable than those of the shares sold in the offering. 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
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<PAGE>
available on acceptable terms, if at all. If adequate funds are not available,
we may be required to further delay, scale-back, or eliminate certain aspects
of our operations or attempt to obtain funds through arrangements with
collaborative partners or others that may require us to relinquish rights to
certain of our technologies, product candidates, products, or potential markets.
If adequate funds are not available, R-Tec's business, financial condition, and
results of operations will be materially and adversely affected.
The actual research and development and related activities of R-Tec
may vary significantly from current plans depending on numerous factors,
including changes in the costs of such activities from current estimates, the
results of R-Tec's research and development programs, the results of clinical
studies, the timing of regulatory submissions, technological advances,
determinations as to commercial potential, the status of competitive products.
The focus and direction of R-Tec's operations will also be dependent upon the
establishment of collaborative arrangements with other companies, and other
factors.
Until required for operations, R-Tec's policy is to invest its cash
reserves in bank deposits, certificates of deposit, commercial paper, corporate
notes, U.S. government instruments and other investment-grade quality
instruments.
There can be no assurance that R-Tec will be able to commercialize
its technologies, or that profitability will ever be achieved. R-Tec expects
that its operating results will fluctuate significantly from quarter to quarter
in the future and will depend on a number of factors, most of which are outside
R-Tec's control.
Business
History of Our Company
R-Tec, was recently incorporated under the laws of the State of New
Jersey on October 22, 1998. R-Tec has no significant assets with the exception
of its patent. To date, activities have been limited to organizational matters,
product research, developing a corporate business plan, patent filings,
negotiating license agreements and the preparation and filing of the
registration statement of which this prospectus is a part.
Background
Presently, there are three major methods used to detect gas freon
leaks. The oldest method is to coat suspected leak sites with a liquid, such as
soap bubbles. Pressure from the escaping gas causes bubbles to form which
confirms a leak at the site. Although inexpensive and generally applicable, this
method lacks the ability to locate small leaks which over time can allow large
volumes of gas to escape. The second major method is the use of electronic
ionization detectors. Although more expensive than the pressure based detection
method, false results have been noted due to interaction with metallic pipes.
Moreover, their effectiveness diminishes with the amount of escaping gas. As a
result, such detectors have a limited ability to find small leaks. The third,
and perhaps most effective currently available detection method, is the internal
injection of liquid based dyes. The dye leaks through the opening and can be
seen on the outside of the pipe. This method necessitates purchasing expensive
equipment, hiring trained technicians, and purchasing costly dyes for each
application. Recently, some hardware manufacturers have declared due to the
invasive nature of these dyes, that their use may void the manufacturer's
warranty. Our products are designed as an external coating which is
non-corrosive and will not interfere with the operation of the pipe or equipment
and we believe the manufacturer's warranties will not be affected. Moreover,
none of the competitive methods provide any form of passive leak detection.
The benefits that would result from early detection of leaks in gas
lines may be substantial. By specifically identifying the source of a gas leak
and permitting the early detection of the escaping gas, our products may reduce
environmental damage caused by leaks of gases, which are believed to cause ozone
depletion and other environmental problems. In addition, by specifically
indicating the location of a leak, our products may enable owners or operators
to promptly and cost effectively repair the leak and reduce the gas replacement
cost incurred as a result of leakage.
Our Proposed Business
R-Tec was formed to develop and manufacture reactive paints and
other products to coat pipe junctions. Once sealed with the paint, gas escaping
through the painted junction, causes a chemical reaction resulting in a visible
color change of the paint.
For example, during the manufacture and installation of air
conditioning and refrigeration systems, the manufacturer or installer may apply
R-Tect 22 to the joints of the system. R-Tect 22 placed externally on the
system, waits for leaking gas to pass through it. When a leak occurs at a coated
joint, the blue paint should change to a bright florescent yellow, identifying a
leak from the inside out. R-Tect 22 does not react with gases in the air
surrounding the pipe. Thus, the exact location of the leak is
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identified. R-Tect 22 not only detects gas leaks from a system, but also we
believe, based on the tests we have performed, neutralizes limited amounts of
some of the chloroflurocarbons passing through the paint by removing the
chlorine and fluoride from the gas, making the gas inert and possibly harmless
to the ozone layer. Freon gas is trapped in our paint as it escapes from the
leaking pipe. A chemical which reacts with the freon causes it to change its
structure through a polymer which traps the chemical and prevents the release
of harmful gases into the air.
In addition, R-Tect 22 may react to the leak before significant refrigerant
gas escapes from the system and the owner of the equipment experiences any
failure or need to replace the gas, thereby reducing the need for further
production of chloroflurocarbons. Although there are calls for reducing the
amount of chloroflurocarbon production, due to the overwhelming use of this
product worldwide, these gases will be produced overseas and domestically until
the year 2040.
The first products we plan to make available for sale are:
o R-Tect 22 reactive paint. R-Tect 22 is an external application paint
designed to detect R-22 freon gas leaks in air conditioning units.
o R-Tect 12 reactive paint, developed for automotive application to detect
R-12 freon gas,
o R-Tect carbon dioxide reactive paint developed as an external application
paint designed to detect carbon dioxide leaks in pipe systems which contain
gaseous or liquid carbon dioxide, and
o R-Tect Natural Gas reactive paint developed as an external application paint
which is designed to detect natural gas leaks in a variety of systems.
Other products nearing the end of development are R-Tect 134A reactive
paint, developed to detect R-134A, a gas in air conditioning applications. We
expect R-Tect natural gas reactive paint, R-Tect carbon dioxide reactive paint
and R-Tect 22 reactive paint to be available for commercial production in
October 1999. R-Tect 12 reactive paint should be available in November 1999,
along with R-Tect 134A reactive paint. However, no assurance can be given that
commercial production will, in fact, occur on this timetable.
Two-Phase Business Plan
Our business plan is based on implementing our strategy in two phases:
o Phase 1 - Establish Manufacturing and Distribution Relationships and Begin
Distribution of Three Initial Products, and
o Phase 2 - Expand Product Lines.
The key elements of each phase of our strategy are described below:
Phase 1 - Establish Manufacturing and Distribution Relationships and Begin
Distribution of the Three Initial Products
R-Tec's primary strategic goals for Phase 1 are:
o The selection of appropriate manufacturing and distribution partners;
and
o The commencement of commercial distribution of our reactive paint products:
o R-Tect 22 freon leak detecting coating. Development of this product is
complete.
o R-Tect 12 freon leak detecting coating. Development of this product is
complete.
o R-Tect carbon reactive paint. Development of this product is expected to
be complete by October, 1999 at an additional cost of $50,000.
During Phase 1, we will incur significant operating expenses.
$850,000 due for patent acquisition will also be payable during this period. We
do not expect to generate significant operating revenues for a period of at
least six months after the completion of this offering.
During Phase 1 R-Tec will require manufacturing facilities, office
space and warehouse space. These facilities may be purchased or leased.
Manufacturing and Distribution Relationships.
---------------------------------------------
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One of R-Tec's Phase 1 goals is to establish beneficial
relationships with strategic manufacturing and distribution partners. With this
strategy, we hope to eliminate the need to build a large and costly production
and sales infrastructure and to benefit from the inclusion of our products in
our partners' marketing efforts.
R-Tec has entered into a manufacturing contract with Anscott
Chemical Industries, Inc., a nationally recognized manufacturer of chemical
products located in Wayne, New Jersey.
Anscott will be the exclusive manufacturer of our leak detection
products; R-Tect 12, R-Tect 22, and R-Tect carbon dioxide reactive paints. The
agreement is for five years. The rights granted to Anscott under the agreement
are limited to these three specified products and to the United States.
Anscott's exclusivity rights with respect to R-Tect carbon dioxide reactive
paint is further limited to the dry cleaning industry. Anscott will manufacture
our products based on purchase orders received from R-Tec. R-Tec intends to
locate a quality control technician employed by us at Anscott's offices, but
there is no provision in our contract with Anscott which requires Anscott to
accept such supervision.
We reached an oral distribution agreement with Motors & Armatures in
June, 1997. Motors & Armatures is believed to be one of the largest distributors
of air conditioning, refrigeration, and heating parts and supplies to
wholesalers and original equipment manufacturing accounts in the U.S. It sells
primarily to North America.
Motors & Armatures has placed an initial order for 5,000 kits of
R-Tect 22 reactive paint at $44.00 per kit. We believe that Motors & Armatures
will distribute R-Tect kits (R-Tect 12, R-Tect 22, and later R-Tect 134A)
reactive paints, primarily to organizations that will in turn sell them to air
conditioning or refrigeration contractors. We expect to deliver R-Tect 22 to
Motors & Armatures by October 31, 1999. Motors & Armatures has advised us that
it intends to create artwork for our products which it will be distributing and
intends to hire an exclusive representative to work on the R-Tect product line.
This specialist will travel with Motors & Armatures' sales representatives to
train and educate its clients in the use of our products. Motors & Armatures has
orally represented to us that it has allocated $156,000 for advertising in the
first year for R-Tec's products and that it will also provide a direct mail
campaign to reinforce the advertising program.
Motors & Armatures has proposed a six month test marketing program
to determine the volume level of sales. It intends to promote R-Tec's products
as both, leak detectors, and as preventative maintenance products.
R-Tec's Efforts To Expand Commercial Use of Initial Products.
-------------------------------------------------------------
During Phase 1 R-Tec also intends to pursue direct sales to
end-users and the original equipment manufacturing market. We will also complete
research and development of our remaining initial products and will pursue
marketing of these products. Potential users include public utility companies,
automotive, marine, aviation, aerospace companies, and commercial real estate
owners and developers. We have met with one utility company, Brooklyn Union Gas
Utility. No sales have resulted from that meeting. Other utility companies have
expressed an interest in the product. We plan to meet with Public Service
Electric & Gas and Con Edison Public Utilities. We have also identified
government agencies and municipalities where our products can reduce
maintenance, overhead and provide another means to detect harmful gases. We also
intend to pursue licensing arrangements with select end-users.
We believe a marketing opportunity will also develop from insurance
companies that underwrite risk associated with gas explosions. R-Tec will
introduce its products to these insurance companies and will attempt to persuade
them either to mandate the use of R-Tec's reactive paint products or to provide
financial incentives, such as discounted insurance rates, to companies that
utilize R-Tec's detection products.
We believe that a marketing opportunity will develop for the use of
R-Tec's reactive paint products to detect natural gas and propane leaks.
Specifically, during the installation of a gas pipe, the installer could apply
our paint to pipe joints. Property owners could also apply our reactive paint to
pipe joints in existing structures. If natural gas or propane leaks through a
stress crack, the paint is designed to change colors, indicating a leak, and
warning anyone who examines the pipe joint.
We also believe a market may exist for our reactive paint products
in chemical plants. Chemical plants utilizing our reactive paint products could
reduce the chance of significant damage caused by a toxic chemical or gas leak
by applying our products to pipe joints in their manufacturing facilities.
We also believe our reactive paint products could be used in the
aerospace and aviation markets. We believe that aircraft utilizing our reactive
paint products could possibly avert disasters caused by gas and fluid leaks if,
during a routine inspection, a mechanic notes a change in color of the paints
applied to pipe joints aboard the aircraft. Should there be a leak, it could be
detected and repaired prior to the aircraft taking off.
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It is possible, though unlikely, that our paint could be caused to
change color due to exposure to some other substances or gas from another
source. A false positive reading due to ambient gases is minimized by the use of
a clear polymer coating, which encases each of the R-Tec paints. When properly
applied, the paint's impermeable coating serves to ensure that only gas leaking
from the protected source can contact the reactive paint and therefore cause a
positive reading. None of the testing conducted to date has indicated any
variance of responsiveness of R-Tec's products to geographic area or weather
conditions, such as humidity, air pressure or smog level.
Phase 2-Expand Product Lines and Expand Internal Sales
R-Tec anticipates that it will add product lines in Phase 2 which
will be marketed to the users identified in Phase 1. R-Tec will continue to
pursue new business with public utilities by developing new products which
address specific needs with the industry.
The speed with which we can develop, introduce, test market and
expand sales of the additions to the R-Tec product line will determine the
timing of the realization of our Phase 2 goals. This phase will be characterized
by new product introductions, test marketing, expanded sales efforts, and
industry driven mandates for the use of R-Tec products.
During Phase 2, in addition to manufacturing facilities, office
space and warehouse space required during Phase 1, R-Tec will require laboratory
facilities for product development.
During Phase 2, R-Tec will develop additional gas detection coating
products.
o R-Tect ethylene detector. The estimated development time is 90 days at
an approximate cost of $70,000.
o R-Tect propane reactive paint. The estimated development time is 90
days at a cost of approximately $100,000.
o R-Tect natural gas reactive paint. The estimated development time is
90 days at an estimated development cost of approximately $200,000.
o R-Tect SF6 detector. The estimated development time is 90 days at an
estimated development cost of approximately $200,000.
o R-Tect 134A, a freon detecting coating designed for the automotive, air
conditioning and refrigerator contractors market. The estimated
development time is 180 days at an approximate cost of $55,000.
o R-Tect 410, a freon detecting coating designed for the residential and
commercial air conditioning and refrigerator contractors market. The
estimated development time is 180 days at an approximate cost of $55,000.
In the event the minimum number of shares offered are sold, R-Tect
134A and R-Tect 410 would not be developed from the proceeds of the offering.
Other Potential Applications Of R-Tec's Detection Technology.
Following the development of the products discussed above, R-Tec
intends to develop coatings which detect the following gases. The development
time and cost for each project has not been estimated by R-Tec. R-Tec's ability
to develop additional gas detection products will be dependent upon the proceeds
from this offering and the amount of funds available, if any, from operations.
Ammonia Chlorine Methane
Butane Ethane Methyl Mercaptan
Carbon Monoxide Isobutane Sulphur Hexaflouride
Acetylene Carbon Sulfide 2-Methylpropene
Acetyl Fluoride Carbon Tetrafluoride Nitric Oxide
Allene Hexafluoropropane Nitrogen
Arsine Hydrogen Nitrous Oxide
Boron Trichloride Hydrogen Chloride Other Refrigerants
Boron Trifluoride Isobutylene Phosgene
Bromotrifluoromethane Methyl Ether Propene
1,3-Butadiene Methanethiol Sulphur Dioxide
2-Methylpropane Trimthylamines
We also intend to research the feasibility of using a small strip
across the top of wrapped chicken parts and meat as a means of measuring
freshness. This fine lined strip would be the color green, indicating the
chicken is fresh. If this strip turns
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red, this would indicate that the chicken is diseased or tainted with
salmonella. This would alert both the retailer and the consumer to the presence
of a disease that might not have been detected without this safety strip.
We intend to work with utility companies on the detection of SF6
gas. This gas is used as an insulator in transformers and takes the place of
harmful PCBs. When these gases leak out of a transformer, they may cause the
electricity passing through the gas to spark and cause an explosion. Currently,
the only way the utility company can detect a leak is when the transformer
explodes and it must be replaced at great cost to utility companies and the
consumer. R-Tec proposes that when a transformer is assembled, the utility
company place a strip of our paint around the top of the transformer so that
utility workers will be able to easily detect a change in the color of a
transformer hanging on a utility pole, if a leak occurs.
Blood Gases
R-Tec believes there may be an interest in the use of our
technology in the field of blood gases. Blood travels from the heart to the
lungs, liver, kidneys and other major organs. During this trip it is carrying a
percentage of oxygen, carbon dioxide and certain other metabolic gases. However,
when there is a restriction in this flow, possibly due to coronary artery
disease, the heart and lungs are unable to supply the proper amount of oxygen to
the blood. Therefore, the oxygen level begins to decrease and the carbon dioxide
level will increase.
R-Tec believes that by detecting gas on a molecular basis at the
rate of -10 to the 64th power, the medical field may have the ability to detect
a change in the amount of carbon dioxide in the blood. This may help patients
with a family history or high risk of heart attacks or strokes to possibly know
if they have a serious medical condition. For example, a person might be able to
rub some gel on their wrist once a month. This gel would consist of a form of
R-Tec's product and dimethyl sulfoxide, a substance that carries medicine into
the body. If the blood flowing through the arterial arteries has a higher than
normal level of carbon dioxide, which is indicative of a restriction of blood
flow and oxygen, the gel would turn from one color to another, possibly warning
the individual that they may be within weeks of suffering a stroke or heart
attack. This pre-warning system will allow a person to seek medical attention
and relieve the arterial restriction before suffering the damage caused by a
heart attack or stroke. Since smog does not affect a person's arterial blood gas
level because the level of these gases is maintained internally, there is little
likelihood of external factors affecting the potential product. The feasibility
of this potential product cannot be assured.
Los Alamos National Laboratory
Los Alamos National Laboratory, (developers of the atomic weapons
program), has requested a sample of our leak detection products. R-Tec intends
to explore the possibility of using its technology for the carbon dioxide
experimental facility at Los Alamos.
Employees
R-Tec currently has four full-time employees. Three full time
employees are officers and directors, and one is clerical. Additionally, R-Tec
has retained the services of the following on a part-time basis: two scientists,
five clerical, secretarial or accounting personnel and one consultant and
director. Upon successful completion of this offering, assuming all the shares
are sold, we plan to hire approximately 30 to 50 additional full-time employees.
If the minimum is sold, we expect to hire five additional employees, for a total
of nine full-time employees.
Facilities
R-Tec's executive offices are located at 61 Mallard Drive, P.O. Box
282, Allamuchy, New Jersey 07820. Our rent is $2,000 per month under a lease
which expires on October 30, 2000. We also have an office and warehouse at 499
Van Brunt Street, Suite 4B, Brooklyn, New York 11231. Our rent for that space is
$1,000 a month under a lease which expires on October 23, 1999.
Management believes that R-Tec's existing offices are unsuitable and
inadequate for their future needs. Upon the successful completion of this
offering, we plan to purchase or lease a building which will contain our
offices, warehouse, research and development laboratory, and manufacturing
operation at one location. We expect we will need a 50,000 to 75,000 square-foot
facility. If we purchased a building, the cost may be estimated to be between
$2.5 million and $3.75 million. If we leased such a facility, the expected
annual lease cost may be estimated at $125,000-$200,000.
Patent
R-Tec's gas detecting coating technology is the invention of Robert
J Verdicchio, Stewart R Kaiser, and Shawn Walsh. Their invention is protected by
U.S. patent #5783110, issued July 21, 1998, entitled, Composition for the
Detection of
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Electrophilic Gases and Methods of Use Thereof. The patent describes a coating
which detects gases, such as chlorodifluoromethane or carbon dioxide, which are
attracted to electrons. Upon contact with such gases, protons are exchanged
between the gas and the paint. The loss or gain of protons causes a dye
incorporated in the paint to change color, indicating the presence of gas.
On March 28, 1997, Mr. Verdicchio, Mr. Kaiser and Mr. Walsh assigned
all of their interest in the patent to Muriel Kaiser. On November 2, 1998
Muriel Kaiser assigned all right, title and interest together with all rights
of priority in U.S. patent #5783110 to R-Tec. This assignment has been filed
with the U.S. Patent and Trademark Office.
On May 10, 1999, R-Tec executed a promissory note in favor of Muriel
Kaiser in the principal amount of $850,000 to pay for the transfer of the patent
to R-Tec. The note bears interest at the rate of 6% per annum is to be paid in
full within 30 days following the completion of this offering. By letter
agreement dated July 2, 1999, Mrs. Kaiser has agreed that in the event 625,000
shares are not sold by January 10, 2000, payment will be made by R-Tec's
execution of a promissory note for $850,000 due and payable in equal quarterly
payments over a five-year period at 6% interest.
There can be no assurance that any of our future patent applications
will be granted, that any current or future patent or patent application will
provide significant protection for our products or technology, be of commercial
benefit or that the validity of such patents or patent applications will not be
challenged. Moreover, there can be no 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
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Marc M. Scola 32 Vice President, General
61 Mallard Drive Counsel and Director
Allamuchy, New Jersey 07820
Damon E. Palmer 35 Director
8380 SW 39 Court
Davie, Florida 33328
Shawn P. Walsh 24 Director
538 Wren Way
Branchburg, New Jersey 08876
Each director is elected for a period of one year and serves until
his successor is elected by our shareholders.
Philip Lacqua, age 50, will serve as the President, Treasurer and as a Director
of R-Tec. His duties will include responsibility for the overall management of
R-Tec and sales. Mr. Lacqua was awarded a Bachelor of Science degree from
Central College of Iowa in 1970. with a major in Political Science.
Since 1970, Mr. Lacqua has served as President and Vice President
for various companies. In 1971, Mr. Lacqua started Container Maintenance Corp.,
which was in the business of repairing ocean-going containers, trailers and
chassis. At the same time he started CMC Haulage, Inc., which provided for
interstate and intrastate trucking. In 1973, Mr. Lacqua merged his companies
with others and formed Marine Repair Services, Inc. He assumed the title of Vice
President of Sales. Marine Repair was primarily in the business of repairing
containers, trailers and chassis in the New York area. In December, 1977, Mr.
Lacqua sold his interests in CMC Haulage and Marine Repair.
In February, 1978, Mr. Lacqua formed Eastern Industrial Supply Corp.,
a ship supply company. Mr. Lacqua then formed Marine Technical Service, Inc.,
and served as a Director and President, overseeing all aspects of that company.
Marine Technical specialized in sales to the Far East, the Middle East and
Europe. In June, 1998, Mr. Lacqua resigned as an officer and director of Marine
Technical Service, Inc. to devote all of his attention to R-Tec. Mr. Lacqua
commenced work for R-Tec in May 1996, prior to its incorporation.
Nancy Vitolo, age 36, will serve as a Vice President, Secretary and
as a Director of R-Tec. As such her duties will include public relations. Ms.
Vitolo owned and was employed by Garden State Heating and Air Conditioning
Corporation as a secretary from 1991 until February, 1998. Garden State became
one of the top 50 Bryant/Carrier Dealers in gross sales in the continental U.S.
and Canada. Beginning in March 1998, Ms. Vitolo worked with R-Tec as a
consultant until she became an employee in April, 1999. Ms. Vitolo was a sales
representative for Yves Saint Laurent for the ten years prior to her
association with Garden State.
In 1995, Ms. Vitolo and Mrs. Kaiser began the research project which
resulted in the development of the reactive paint technology now owned by R-Tec.
Ms. Vitolo and Mrs. Kaiser opened a laboratory and engaged scientists to
research the feasibility of creating a better method for detecting minute gas
leaks. A laboratory was leased in Warren County, New Jersey and chemists and
other scientists were engaged to perform research in this area and conduct
experiments. Ms. Vitolo later withdrew from active participation in the project,
but continued to assist Mrs. Kaiser in the funding of the patent. Ms. Vitolo
personally loaned Mrs. Kaiser approximately $425,000 to fund the development of
the patent.
Marc M. Scola, age 32, will serve as a Vice President, General
Counsel and a Director of R-Tec. His duties will include preparing and
negotiating R-Tec's license agreements, contracts, and various other legal and
corporate matters. Mr. Scola was an attorney in private law practice for six (6)
years.
Mr. Scola was awarded a Bachelor of Arts degree from Seton Hall
University in South Orange, New Jersey in 1988. He then was awarded his Juris
Doctorate (J.D.) degree by Texas Southern University School of Law in Houston,
Texas in 1992. Mr. Scola obtained a Graduate Law Degree (L.L.M.) in Taxation
from Temple University School of Law in Philadelphia, Pennsylvania in 1996.
Mr. Scola began his law practice as a solo practitioner in 1993 with
the Law Firm of Marc M. Scola, Esq., P.C. located in Florham Park, New Jersey.
In January of 1996, Mr. Scola formed the Law Firm of Scola & Walterschied,
P.C., a two-attorney firm, located in Roseland, New Jersey, as a partner. In
1997, Mr. Scola continued in solo practice as Marc M. Scola, Esq., P.C., in
Allamuchy, New Jersey. Mr. Scola has been working on the R-Tec project since
May 1996.
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Mr. Scola, served as counsel to a wide variety of businesses,
including construction companies, physician practices, manufacturing operations,
and computer consulting firms. Mr. Scola has been involved in the review,
negotiation, financing, employment issues, and restructuring of the business
entities. He also had experience in the preparation of shareholder, partnership
and limited liability company, stock option, employment, leasing and other types
of commercial agreements.
Damon E. Palmer, age 35, was elected to serve as a director of R-Tec
on April 14, 1999, and is also a member of the Compensation and Audit Committees
of the Board. Mr. Palmer is Vice President and Chief Financial Officer of
Trinity Industrial Services, a computer consulting company, since 1998. From
1996 until 1998 he was Controller of Marine Technical Services, which was formed
by Mr. Lacqua. Between 1994 and 1996 he was an office administrator for Edward
Jones, C.P.A. From 1989 until 1994 he was a manager of a branch of the Glidden
Company, which engaged in the business of manufacturing and selling paint
products.
Shawn P. Walsh, age 24, was elected to serve as a director on April
14, 1999. He graduated from Johns Hopkins University in Baltimore, Maryland in
1996 with a Bachelor of Science degree in Chemistry. He worked for R.W. Johnson
Pharmaceutical Research Institute in Raritan, New Jersey from December 1996 to
March 1999 as a scientist.
R-Tec has a one year consulting Agreement with Mr. Walsh which
terminates on January 1, 2000. Mr. Walsh has been engaged to perform consulting
services regarding scientific experiments and research on reactive paints.
R-Tec is to pay Mr. Walsh $1,000 per month for a total of $12,000 plus all
reasonable out of pocket expenses. Mr. Walsh has no ownership rights to the
patent by virtue of his assignment of all of his rights to Mrs. Kaiser. Key
Employees And Consultants
The following biographical information relates to our consultants:
Name Position
Stewart R. Kaiser Consultant
Shawn P. Walsh Scientific Consultant, Director
Robert J. Verdicchio Scientific Consultant
Stewart R. Kaiser, age 32, is a graduate of Union County Technical College
in Scotch Plains, New Jersey, receiving a degree in the Heating, Ventilation and
Air Conditioning Mechanical Program. Mr. Kaiser was employed by Garden State Air
Conditioning and Heating from 1991 until February 1998 as a Mechanical
Contracting Supervisor. From March, 1998 until the present Mr. Kaiser worked as
a consultant for R-Tec. Mr. Kaiser was one of three inventors of the patented
proprietary technology which has been assigned to R-Tec. Mr. Kaiser has no
ownership rights to the patent by virtue of his assignment of all of his rights
to Mrs. Kaiser. Mr. Kaiser is the husband of Nancy Vitolo, and the son of Muriel
Kaiser. Mr. Kaiser has no ownership rights to the patent. On November 4, 1998,
Mr. Kaiser filed for Chapter 7 Bankruptcy protection in the United States
Bankruptcy Court, District of New Jersey. On December 16, 1998, he voluntarily
withdrew his Bankruptcy Petition.
R-Tec has a one year Consulting Agreement with Stewart R. Kaiser,
which terminates on January 1, 2000. Mr. Kaiser has been engaged to perform
consulting services regarding scientific experiments and research on reactive
paints. R-Tec is to pay Mr. Kaiser $1,000 per month for a total of $12,000 plus
all reasonable out of pocket expenses.
Robert J. Verdicchio, age 65, has been employed by Verdi
Enterprises, Inc., a chemical consulting company of Succasunna, New Jersey, of
which he is the principal owner since January, 1996. He was employed by Johnson
and Johnson Consumer Products in Skillman, New Jersey ,from 1973 until his
retirement in 1995. He has been engaged in the development of the patented
technology since 1996 and has worked for R-Tec as a consultant since July 1996.
He received a Ph.D. in Metaphysical Science in 1994 from the University of
Metaphysics in Los Angeles, California, a Master of Science degree in 1990 from
Fairleigh Dickinson University, and a Bachelor of Science degree in Organic
Chemistry in 1962 from Rutgers University. He was one of three inventors of the
patented proprietary technology which has been assigned to R-Tec. Dr. Verdicchio
has no ownership rights to the patent by virtue of his assignment of all of his
rights to Mrs. Kaiser. Dr. Verdicchio has agreed to consult for R-Tec on an as
needed basis.
Executive Compensation
R-Tec was only recently incorporated, and has not paid any
compensation to its executive officers and directors. R-Tec has entered into
employment agreements dated April 4, 1999 with Marc M. Scola, Nancy Vitolo and
Philip Lacqua, who are officers and directors of R-Tec. The agreement with Mr.
Scola provides for the payment of $330,000 plus bonus per year
19
<PAGE>
retroactive from January 1, 1999 for a five year term and will commence upon
the sale of the minimum number of shares. Mr. Scola is employed as Vice
President, director and General Counsel of R-Tec. Mr. Scola has waived his
salary due under the agreement through March 31, 1999.
The employment agreement with Ms. Vitolo provides for the payment of
$330,000 plus bonus per year retroactive from January 1, 1999 for a five year
term and will also commence upon the sale of the minimum number of shares. Ms.
Vitolo is employed as Vice President, Secretary and director of R-Tec. Ms.
Vitolo has waived her salary due under the agreement through March 31, 1999.
The employment agreement with Mr. Lacqua provides for the payment of
$330,000 plus bonus per year retroactive from January 1, 1999 for a five year
term and will commence upon sale of the minimum number of shares. Mr. Lacqua is
employed as President, Treasurer and director of R-Tec. Mr. Lacqua has waived
his salary due under the agreement through March 31, 1999.
In the event the minimum number of shares offered were sold, Mr.
Scola, Mr. Lacqua and Ms. Vitolo would defer their salaries until sufficient
funds were available. Sale of the minimum number of shares offered would provide
sufficient funds for R-Tec to operate for 24 months without revenue.
In addition, R-Tec established a Stock Option Plan on April 15, 1999
which provides that all regular full-time employees and key executives may be
issued options to purchase a total of up to one million shares of our common
stock at a price not less than 100% of the fair market value of the shares on
the date the option is granted. The plan is to be administrated by the Stock
Option and Compensation Committee of the Board of Directors, consisting of at
least two disinterested directors. On April 14, 1999 the Board formed a
Compensation Committee which consists of a total of three directors with two
disinterested directors. We also intend to implement a Pension Plan in the near
future.
All of our officers are also directors of R-Tec and are, therefore,
not independent. No independent person has reviewed the employment agreements.
However, since April 14, 1999 the Board of R-Tec includes two disinterested
directors who are members of the Compensation and Audit Committees.
If R-Tec sells the maximum amount of shares, $5,485,000 represents
an estimate of the total employee compensation for 48 to 60 months, including
salaries for its officers and staff. The consulting agreements in effect do not
cover full-time employment by these consultants, which must be negotiated at the
appropriate time in the future.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
------------------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Name Other Securities
and Annual Restricted Underlying LTIP All Other
Principal Compen- Stock Options/ Payouts Compen-
Position Year Salary($) Bonus($) sation($) Awards ($) SARs ($) ation($)
- --------------------------------------------------------------------------------------------------------------------------
Philip Lacqua 1997 --- --- ---- ---- ---- ---- ----
President, Treasurer 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Nancy Vitolo 1997 --- --- ---- ---- ---- ---- ----
Secretary 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Marc M. Scola 1997 --- --- ---- ---- ---- ---- ----
General Counsel 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Damon E. Palmer 1997 --- --- ---- ---- ---- ---- ----
Director 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Shawn P. Walsh 1997 --- --- ---- ---- ---- ---- ----
Director 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
</TABLE>
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<PAGE>
Principal Shareholders
The following table presents the shares of common stock of R-Tec
owned of record or beneficially by each person known to own more than 5% of
R-Tec's common stock, and the name and shareholdings of each officer and
director and all officers and directors as a group:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Percent After Percent After
Principal Stockholder's Number of Percent Prior Minimum Maximum
Name and Addresses Shares Owned to Offering Offering Offering Office(s) Held
Philip Lacqua 5,000,000 33 1/3% 32% 26.66% Director,
1127 83rd Street President,
Brooklyn, New York 11228 Treasurer
Nancy Vitolo 5,000,000 33 1/3% 32% 26.66% Director,
290 Green Road Vice President,
Sparta, New Jersey 07871 Secretary
Marc M. Scola 5,000,000 33 1/3% 32% 26.66% Director,
61 Mallard Drive Vice President,
Allamuchy, New Jersey 07820 General Counsel
Damon E. Palmer -0- 0% 0% 0% Director
8380 SW 39 Court
Davie, Florida 33328
Shawn P. Walsh -0- 0% 0% 0% Director
538 Wren Way
Branchburg, New Jersey 08876
All Officers and
Directors as a Group 15,000,000 100% 96% 80%
</TABLE>
Certain Relationships and Related Transactions
Mr. Lacqua, Ms. Vitolo and Mr. Scola own 15,000,000 shares. The
contributed $540,000 in capital through March 31, 1999. As of March 31, 1999,
$75,857 of this amount is due pursuant to a promissory note from Ms. Vitolo
bearing interest at 6.0% per annum.
The patent covering R-Tec's proprietary technology was assigned to
us by Muriel Kaiser. Mrs. Kaiser is the mother of Stewart Kaiser and Nancy
Vitolo's mother-in-law. Ms. Vitolo is the wife of Stewart Kaiser. In
consideration for the patent, we executed a promissory note in favor of Mrs.
Kaiser. Pursuant to the promissory note, R-Tec was obligated to pay $850,000
payable in full within thirty (30) days of the completion of this offering. By
letter agreement dated July 2, 1999, Mrs. Kaiser has agreed that in the event
625,000 shares are not sold by January 10, 2000, payment will be made by R-Tec's
execution of a promissory note for $850,000 due and payable in equal quarterly
payments over a five-year period at 6% interest.
R-Tec had previously executed an agreement in favor of Philip Lacqua,
Nancy Vitolo and Marc M. Scola under which R-Tec agreed to reimburse Mr.
Lacqua, Ms. Vitolo and Mr. Scola for all expenses advanced by such individuals
prior to and after the date of R-Tec's incorporation. Such expenses include,
but are not limited to, attorneys' fees, accountant fees, office leases,
advertising, travel, and general expenses of this offering. On May 26, 1999,
sums due Mr. Lacqua, Ms. Vitolo and Mr. Scola were reduced or reclassified as
equity. No sums are currently due to Mr. Lacqua, Ms. Vitolo or Mr. Scola.
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.
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<PAGE>
Indemnification
R-Tec's Articles of Incorporation, as amended, provide that, to the
extent not inconsistent with applicable law, R-Tec shall indemnify and hold
harmless its officers, directors, employees and agents from liability and
reasonable expense from actions in which he or she may become involved by reason
of the fact that he or she was an officer, director, employee or agent. We
expect to obtain an insurance liability policy for this purpose at a cost of
approximately $75,000 - $150,000 per year.
Disclosure Of Commission Position On Indemnification For Securities
Act Liabilities
Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers and controlling persons of R-Tec
pursuant to the foregoing provisions, or otherwise, R-Tec has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that any claim for indemnification against such
liabilities, (other than the payment by the small business issuer of expenses
incurred or paid by a director, officer or controlling person of the small
business issuer in the defense of any action, suit or proceeding), is asserted
by such director, officer or controlling person in connection with the
securities being registered, R-Tec will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of the Court of such issue.
Organization Within Last Five Years
As soon as the money from this offering is made available, R-Tec
expects to make all arrangements necessary so that it can commence commercial
operations in 1999.
Description of Securities
The following statements summarize detailed provisions of R-Tec's
Articles of Incorporation and Bylaws, copies of which will be furnished to an
investor upon written request.
Authorized Capital
Our authorized capital stock consists of 50,000,000 shares of
$.00001 par value common stock. We have outstanding 15,000,000 shares of common
stock, all of which are validly issued, fully paid and non-assessable.
Common Stock
The shares being offered are shares of common stock. Currently
there are no markets for the common stock and there can be no assurances there
will ever be a public market in the future.
R-Tec is presently authorized to issue 50,000,000 shares of $.00001
par value common stock. There are 15,000,000 shares issued and outstanding, and
a maximum of 3,750,000 shares are for sale in this offering. The shares of
common stock being sold will be, when issued in accordance with the terms of the
offering, fully paid and non-assessable.
The holders of common stock, are entitled to equal dividends and
distributions per share with respect to the common stock when and if declared by
the Board of Directors from funds which are legally available. R-Tec has not
paid any dividends on common stock to date and does not anticipate paying
dividends on common stock in the foreseeable future. No holder of common stock
has a pre-emptive right to subscribe for any securities nor are any common
shares subject to redemption or convertible into other securities of R-Tec. Upon
liquidation, dissolution or winding up of R-Tec, and after payment of creditors
and preferred 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.
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<PAGE>
Preferred Stock
R-Tec is currently authorized to issue shares of Preferred Stock.
Accordingly, the Board of Directors could authorize the issuance of shares of
Preferred Stock. Preferred Stock may, if and when issued, have rights superior
to those of the common stock offered hereby. The Board of Directors may approve
the issuance of Preferred Stock without a vote by shareholders and conversion
rights may adversely affect the voting power of holders of common stock.
Transfer Agent
The Bank of New York, Inc., One Wall Street, New York, New York
10286, is the Transfer Agent and Registrar for common stock.
Escrow Agent
The Bank of New York, Inc., One Wall Street, New York, New York
10286 is the Escrow Agent for subscriptions until the minimum number of shares
is sold.
Dividend Policy
We have not paid any dividends on common stock to date and we do not
anticipate paying dividends on common stock in the foreseeable future. We intend
for the foreseeable future to follow a policy of retaining all of its earnings
to finance the development and expansion of our business.
Shares Eligible for Future Sale.
Upon the consummation of this offering at the maximum, we will have
18,750,000 shares of common stock outstanding. Of these shares, the 3,750,000
shares sold in this offering will be freely tradable without restriction or
further registration under the Securities Act, except for any shares purchased
by an affiliate of R-Tec, in general, a person who has a control relationship
with R-Tec, which will be subject to limitations of Rule 144 promulgated by the
Commission under the Securities Act. All of the remaining 15,000,000 shares are
deemed to be restricted securities, as that term is defined under Rule 144
promulgated under the Securities Act, in that such shares were issued in private
transactions not involving a public offering. All of such shares are not
eligible for sale under Rule 144 until December 1, 1999 at which time they will
have been held longer than one year.
Plan of Distribution
R-Tec, is offering a minimum of 625,000 shares and a maximum of
3,750,000 shares of common stock through it officers and directors on a
best-efforts basis. The factors we considered in determining the offering price
of the common stock were our capital requirements, our negative book value, the
percentage of ownership to be held by investors following the offering, the
prospects for our business, the stage of our product development, the lack of
revenue and the prospects for future revenues, and the current state of economy
in the United States.
Until the minimum number of shares are 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,
(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
23
<PAGE>
officers and directors will use their best efforts to find purchasers for the
shares.
Investors should be aware that while this offering is being
conducted through our officers and directors,. R-Tec retains the right to
utilize the services of broker/dealers who are members of the NASD. We reserve
the right to pay commissions for sales made by broker/dealers in an amount not
to exceed 10% of the sales price. Before the involvement of any broker/dealers
in the offering, R-Tec must obtain a no objection position from the NASD for any
compensation arrangements. Any broker/dealers that sells securities in this
offering may be deemed an underwriter as defined in Section 2(a)(11) of the
Securities Act of 1933. R-Tec will amend the prospectus and the registration
statement of which it is a part to identify any selected broker/dealers at such
time as such broker/dealers sells 5% or more of the offering.
Under Rule 3a4-1 of the Exchange Act, none of the selling
shareholders or employees of R-Tec will be a "broker" as defined in the Exchange
Act, solely by reason of participation in this offering, because:
(1) none is subject to a statutory disqualification, as that term is defined in
Section 3(a)(39) of the Act, at the time of his participation; and
(2) none will receive, directly or indirectly, any commissions or other
remuneration based either directly or indirectly on transactions in securities,
(3) none is an associated person (partner, officer, director, or employee) of a
broker dealer, and
(4) each meets all of the following conditions: (a) primarily performs, or is
intended primarily to perform at the end of the offering, substantial duties
for the issuer otherwise than in connection with transactions in securities; (b)
none was not a broker or dealer, or an associated person of a broker dealer,
within the preceding 12 months; and (c) none will not participate in selling an
offering of securities for any issuer more than once every 12 months.
R-Tec has not made any efforts to retain an underwriter. We
believe that we can sell our stock without utilizing an underwriter and thus,
maximize the net proceeds to fund our business plan.
Residents of California purchasing units must meet one of the
following suitability requirements: an investor must (1) be an "accredited
investor" within the meaning of Regulation D under the Securities Act of 1933;
or (2) a person who (1) has an income of $65,000 and a net worth of $250,000 or
(b) has a net worth of $500,000 (in each case excluding home, home furnishings,
and personal automobiles); or (3) a bank, savings and loan association, trust
company registered under the investment company act of 1940, pension or
profit-sharing trust, corporation, or to the entity which, together with the
corporation's or other entity's affiliates, have a net worth on a consolidated
basis according to the most recent regularly prepared financial statement (which
shall have been reviewed but not necessarily audited, by outside accountants) of
net less than $14,000,000 and subsidiaries of the foregoing; or (4) a person
(other than a person formed for the sole purpose of purchasing the units offered
hereby) who is purchasing at least $1,000,000 in aggregate amount of the units.
Residents of Virginia purchasing units must have a net worth of at
least $225,000 or a net worth of at least $60,000 and an annual income of at
least $60,000. Net worth in all cases is calculated exclusive of home,
furnishings and automobiles. Virginia residents may not invest more than 10% of
their readily marketable assets in the offering.
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.
24
<PAGE>
Legal Matters
To the knowledge of management there is no material litigation
pending or threatened against R-Tec. Legal counsel for R-Tec in connection with
this offering is Brashear & Associates, P.L., 926 N.W. 13th Street, Gainesville,
FL 32601.
Experts
The financial statements of R-Tec as of December 31, 1998, included
in this prospectus have been audited by James Moore & Co. P.L., independent
certified public accountants, as indicated in their report with respect thereto,
and are included herein in reliance on such report given upon the authority of
that firm as experts in accounting and auditing.
Change In Independent Accountants
On May 21, 1999, R-Tec engaged James Moore & Co., P.L. as its
independent auditors for the year ending December 31, 1998 to replace the firm
of Jurewicz & Duca, Certified Public Accountants, P.C., who were dismissed as
our auditors effective May 20, 1999. James Moore & Co., P.L. reaudited the
financial statements for the year ended December 31, 1998; no reliance should be
placed on previous financial statements for the same period. R-Tec's Board of
Directors approved the decision to change auditors.
The reports of Jurewicz & Duca, P.C., on the financial statements of
R-Tec from October 29, 1998 (inception) to December 31, 1998 did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. Subsequent to the issuance
of the audit report of Jurewicz & Duca, P.C., information came to the attention
of Jurewica & Duca, P.C. which they have concluded materially impacts the
fairness and reliability of their audit report and the underlying financial
statements. Due to the dismissal of Jurewicz & Duca, P.C., they have not
addressed these issues and therefore have withdrawn their audit report dated
January 7, 1999. No reliance should be placed on this audit report or the
underlying financial statements.
In connection with the audits of R-Tec's financial statements for
the period ended December 31, 1998, and for the interim period preceding their
dismissal, there were no disagreements with Jurewicz & Duca, P.C. on any matters
of accounting principles or practices, financial statement disclosure or
auditing scope and procedures. In a letter dated June 15, 1999, Jurewicz & Duca,
P.C. have confirmed this understanding.
25
<PAGE>
How To Invest In R-Tec
If you want to purchase shares of R-Tec Technologies, Inc. in this
offering please fill in the information requested below and return with a check
payable to "Bank of New York, Escrow, R-Tec Technologies, Inc. #301472" If you
wish to have the shares issued in street name, in the name of the brokerage firm
where you have an account, please complete the bottom portion of the form. If
you are a resident of a state where we are not authorized to sell stock, your
subscription will be rejected and returned to you in full, without interest or
deduction.
26
<PAGE>
COMMON STOCK PURCHASE AGREEMENT
TO: R-Tec Technologies, Inc., Escrow, P.O. Box 282, Allamuchy, New Jersey 07820
Please issue shares of R-Tec Technologies, Inc.'s common stock in the
amount(s) and name(s) shown below. My signature acknowledges that I have
received the prospectus by which the shares are offered.
Signature:______________________________ Date:__________________
Enclosed is payment for ______ shares, at $8.00 per share, totaling $_________.
Please make checks payable to "Bank of N.Y., Escrow, R-Tec," and indicate
account #301472 in legend of check.
Name:_________________________________________________________________
Mailing Address:______________________________________________________
City:___________________ State:_____________ Zip Code:_______________
Telephone No.,________________ Business,_______________ Home
Social Security or Taxpayer ID Number:________________________________
Minimum Investment is $504.00 (U.S. Dollars) (63 shares)
Register the shares in the following name(s) and amount(s):
Name Number of Shares
A)______________________________________ ________________
B)______________________________________ ________________
C)______________________________________ ________________
As (Circle One Below):
Individual Joint Tenants Trust
Tenants in Common Corporation Other
If you would like your stock to be transferred to your Brokerage Account
complete this section. (Complete only if shares will be in the name of the
Brokerage Firm)
Name on Account:______________________________________________________
Name of Brokerage Firm:_______________________________________________
Mailing Address of Brokerage Firm:____________________________________
City:____________________ State:_____________ Zip Code:______________
Telephone Number of Broker:___________________________________________
Social Security Number or Taxpayer I.D. Number:____________________________
27
<PAGE>
Broker Account Number:_____________________________________________________
WIRE INSTRUCTIONS
Routing No. (ABA) 021000018 (Bank of New York)
Beneficiary: GLA-111/565
Account No. 301472
Date Wired:______________________________________
Amount Wired:____________________________________
Confirm Bank Wire with R-TEC at (888) 299-7832
Please make checks payable to "Bank of N.Y., Escrow, R-Tec," and
indicate account #301472 in legend of check.
Please attach any special mailing instructions other than shown above. You will
be mailed a signed copy of this agreement to retain for your records.
---------------------------------------------------------------------------
SUBSCRIPTION ACCEPTED BY R-TEC TECHNOLOGIES, INC.:
______________________________ Dated___________________
Marc M. Scola, Esq.
V.P. & General Counsel
VIRGINIA SUBSCRIBERS
Virginia subscribers must meet the following suitability requirement:
I certify that I am (initial blank) ________ a person who (a) has an annual
income of $60,000 and a net worth of at least $60,000 or (b) has a net worth of
at least $225,000 (in each case excluding home, home furnishings, and personal
automobiles) and that I am not investing more than 10% of my readily marketable
assets in this offering.
MAIL TO: R-Tec Technologies, Inc., Escrow, P.O. Box 282,
Allamuchy, New Jersey 07820 - 1(888) 299-7832
Incomplete Forms will be returned to Sender.
28
<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 21
Certain Relationships
and Related Transactions 21
Description of Securities 22
Plan of Distribution 23
Legal Matters 25
Experts 25
Change in Independent
Accountants 25
How to Invest in R-Tec 26
Financial Statements F-1
----------
R-Tec Technologies, Inc.
3,750,000 Shares Common Stock
$8.00 per share
-------------------------
Until November 3, 1999, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may be
required to deliver a prospectus. This is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters with respect to
their unsold allotments or subscriptions. This prospectus should be read in its
entirety by any prospective investor prior to his or her investment.
