As filed with the
Securities and Exchange Commission on November 12, 1999.
REGISTRATION NO. 333-72405
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM S-1
POST EFFECTIVE AMENDMENT
NO. 2
TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
R-Tec Technologies, Inc.
(Exact Name of Registrant as Specified in Its Charter)
New Jersey 2851 22-3615979
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Classification Code Identification No.)
Incorporation or Number)
Organization)
61 Mallard Dr.
P.O. Box 282
Allamuchy, New Jersey, 07820
(888) 299-7832
(Address and Telephone Number of Registrant's Principal Place of Business)
Marc M. Scola
61 Mallard Drive
Allamuchy, New Jersey 07820
(888) 299-7832
(Name, Address and Telephone Number of Agent for Service)
Copies to:
Bruce Brashear, Esq.
Brashear & Associates, P.L.
926 NW 13th Street
Gainesville, FL 32601
(352) 336-0800
Approximate Date of Proposed Sale to the Public: As soon as practicable from
time to time after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each
Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price Aggregate Offering Amount of
Registered Registered Per Share 1 Price Registration Fee
<S> <C> <C> <C> <C>
common stock 3,750,000 Shares $8.00 $30,000,000.00 $8,340.00
($.00001 par value)
</TABLE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
1 Estimated solely for the purpose of calculating the amount of the registration
fee in accordance with Rule 457 under the Securities Act.
<PAGE>
R-Tec Technologies, Inc.
CROSS-REFERENCE SHEET
Item Number and Heading Heading in Prospectus
1. Front of the Registration
Statement and Outside Front
Cover Page of Prospectus ...............Facing pages; Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus ..............Inside Front and Outside Back
Cover Pages of Prospectus
3. Summary Information and Risk
Factors ................................Prospectus Summary; Risk Factors
4. Use of Proceeds.........................Prospectus Summary; Use of
Proceeds; Description of Business
5. Determination of
Offering Price .........................Cover Page; Prospectus Summary;
Risk Factors; Determination of
Offering Price
6. Dilution................................Dilution; Comparative Data
7. Selling Security Holders................Not Applicable
8. Plan of Distribution....................Front Cover Page; Plan of
Distribution
9. Description of the Securities...........Description of Securities
10. Interest of Named Experts and
Counsel ................................Not Applicable
11(a). Description of Business ................Description of Business
11(b). Description of Property ................Management - Facilities
11(c). Legal Proceedings .....................Legal Matters
11(d). Market for Common Equity and
Related Stockholder Matters ............Front Cover Page; Risk Factors;
Shares Eligible For Future Sale
11(e)(f)(g). Financial Statements .............Financial Statements
<PAGE>
11(h). Management's Discussion and
Analysis or Plan of Operation.......... Plan of Operations
11(i). Changes In and Disagreements
with Accountants on Accounting
and Financial Disclosure ..............Change in Independent Accountants
11(j). Directors, Executive Officers,
Promoters and Control Persons .........Directors, Executive Officers,
Promoters and Control Persons
11(k). Executive Compensation ................Executive Compensation
11(l). Security Ownership of Certain
Beneficial Owners and Management ..... Security Ownership of Certain
Beneficial Owners and Management
11(m). Certain Relationships and
Related Transactions ..................Related Transactions
12. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities ............Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities
<PAGE>
The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated November 12, 1999
PROSPECTUS
R-TEC Technologies, Inc.
1,250,000 Shares Common Stock
$8.00 per share
---------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
R-Tec owns patented paints and other The proceeds of stock will be held in escrow by the
coating technologies which detect leaks Bank of New York and paid to R-Tec only if:
from freon and other gases by changing
color. We intend to sell the paints and o at least 125,000 shares are sold,
to develop new products to detect other o within three (3) months after the effective date of this prospectus
types of gas leaks. or six months after the effective date of the prospectus, if extended
by R-Tec.
This is our initial public offering. There
is currently no public market for the
common stock. Otherwise all subscriptions will be returned to you with interest.
The number of shares offered have been
reduced from the number of shares offered
in our previous prospectus and our plan
of distribution has changed. See "Plan
of Distribution" on page 25.
</TABLE>
The Offering
Commissions
Public Price Total to R-Tec
Per Share................... $ 8.00 $ .80 $ 7.20
Proceeds to R-Tec from
Minimum Offering.......... $ 1,000,000 $ 100,000 $ 900,000
Proceeds to R-Tec from
Maximum Offering.......... $10,000,000 $1,000,000 $9,000,000
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.
Thornhill Group, Inc.
1900 Corporate Blvd., Suite 305 West
Boca Raton, Florida 33431
(561) 241 9921
Member of NASD SEPIC
The date of this prospectus is November 12, 1999
<PAGE>
Table of Contents
Prospectus Summary........................................................... 3
Risks Factors ............................................................... 5
Recent Developments.......................................................... 7
Where You Can Find
Additional Information...................................................... 7
Dilution .................................................................... 8
Use of Proceeds.............................................................. 8
Selected Financial Data .....................................................12
Management's Discussion and
Analysis or Plan of Operation...............................................12
Business.....................................................................13
Management and Affiliates....................................................19
Principal Shareholders ......................................................22
Certain Relationships and
Related Transactions........................................................23
Description of Securities....................................................24
Plan of Distribution ........................................................25
Legal Matters................................................................26
Experts......................................................................26
Change in Independent Accountants............................................26
How to Invest in R-Tec.......................................................27
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. An additional U.S. patent expanding the scope of the issued
patent and foreign patent applications are pending. The original patent was
purchased by R-Tec's issuance of 100,000 common shares and a note payable in the
amount of $450,000. The patent is collateral for the note.
We have developed three gas detecting paints. The paints change
color when gas escapes through the coated junction allowing for rapid detection
of gas leaks. We believe our existing products have broad application in areas
such as the manufacture and installation of air conditioning and refrigeration
systems.
We plan to use these technologies to develop more gas detecting
paints and other products that will be used in a variety of industrial and
manufacturing settings to coat pipe junctions. Examples of such products are a
carbon dioxide reactive paint product which exists in prototype form, designed
to detect carbon dioxide leaks, a natural gas detection reactive paint which
exists in prototype form and a propane leak detection reactive paint product
which has not been developed. In addition to the propane leak detection reactive
paint product, we hope to develop leak detection systems for other gases, such
as ammonia, butane, using our patented technology. R-Tec's detection technology
potentially could be used to measure blood gases, to measure the freshness of
packaged poultry, and to detect gas leaks in electrical transformers. At
present, we have not taken steps to determine feasibility of other potential
applications of our technology. Sale of the minimum number of shares offered
would reduce the number of products which R-Tec can develop and produce.
3
<PAGE>
The Offering
Common Stock Offered.................................Minimum - 125,000 shares
Maximum - 1,250,000 shares
Offering Price.......................................$8.00 per share
Total Number of
Shares Outstanding
After the Offering
(assuming all
offered shares are sold).............................4,266,666 shares
Total Number of
Shares Outstanding
After the Offering
(assuming the minimum
number of shares
offered are sold)....................................3,041,666 shares
Estimated Net Proceeds
(assuming the minimum
number of shares
offered are sold)....................................$790,000
Estimated Net Proceeds
(assuming all offered
shares are sold).....................................$8,620,000
Use of Proceeds......................................We intend to use the net
proceeds of this offering to
o conduct product research and development
o fund initial business operations
o pay salaries
o develop production and marketing plans
o pay for the patent assigned to R-Tec
o provide working capital and for general
corporate purposes.
Dividend Policy......................................We do not intend to pay
any cash dividends for the
foreseeable future.
4
<PAGE>
Risk Factors
Investing in our common stock involves a high degree of risk. In
addition to the other information in this document, you should carefully
consider the following risk factors in evaluating an investment in our common
stock.
If We Sell Only 125,000 Shares, We Might Not Be Able to Operate After 12 Months
Due To Our Cash Shortage And You Might Lose Your Entire Investment.
If only 125,000 shares are sold and R-Tec does not make significant
sales during its first year of operation, R-Tec may not have sufficient capital
to fund operations after 12 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 12 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.
Investors In This Offering Will Experience Immediate And Substantial Dilution.
Investors will experience immediate and substantial dilution between
the initial public offering price of $8.00 and the pro forma net tangible book
value per share of common stock after the offering. Such dilution will amount to
$6.12 or 76.50% if all shares are sold; $6.99 or 87.37% if 625,000 shares are
sold; $7.94 or 99.25% if 125,000 shares are sold.
All Of Our Products Are New And May Not Be Commercially Feasible.
R-Tec may also experience difficulties that could delay or prevent
the development, introduction and marketing of its products. R-Tec will be
dependent upon products that will be developed in commercial quantities in the
future. If we are unable on a timely basis to develop new products or
enhancements to existing products, or if our products do not achieve market
acceptance or commercial success, our business, operational results and
financial condition will be materially adversely affected and investors could
lose their entire investment. Since our products have never been produced in
commercial quantities, there can be no assurance that commercial production will
be feasible. Even if feasible, there can be no assurance that our products will
perform as intended.
If Our Products Fail To Operate Properly, We Will Be Subject To Significant
Liability.
Our products are designed to avoid significant dangers, such as
natural gas leaks. If our products do not function properly and property or
personal injury occurs as a result of gas leaks which should have been detected
by our products, R-Tec may incur significant liability which R-Tec may be unable
to pay.
We Do Not Have Our Own Production Facilities At This Time To Produce Our
Products And Our Office Space Is Inadequate For Future Needs.
At the present time we do not have our own facility to produce the
paints which are our principal products. In addition, our present office space
is inadequate for future needs.
Shareholders May Be Unable To Sell Stock Since There Is No Active Market At
Present.
No public market exists for R-Tec's common stock. You may not be
able to sell your shares promptly or at all, or sell your shares at a price
equal to or above the price you paid for the shares due to the lack of an active
market at present. There can be no assurance that any market will develop for
the securities or that if a market does develop, that it will continue. If we
are unable to qualify for the NASDAQ Small Cap Market listing, we believe that
our stock will trade on over-the-counter market on the OTC Bulletin Board.
Consequently, selling your common stock would be more difficult, transactions
could be delayed, and security analysts' and news media's coverage of R-Tec may
be reduced. These factors could result in lower stock prices.
5
<PAGE>
R-Tec's Business Is Dependent On Patent Protection Which Cannot Be Assured.
R-Tec holds a patent and has pending U.S. and foreign patent
applications on its technology. There can be no assurance that patent, trade
secret or copyright laws will protect our technologies or that we will not be
vulnerable to competitors who attempt to copy or use our products or processes.
There Is A Risk That Our Products Will Not Work As Intended.
We have never produced any commercial quantities of our products and
they have never been tested by consumers. There is no assurance that our
products will work for consumers as intended and no assurance can be given that
our products will not cause damage which will result in liability for R-Tec. If
our products are not commercially viable, we could have insufficient funds to
operate which could result in our terminating operations.
Management Has Broad Discretion In The Use of Proceeds Of This Offering.
Management has broad discretion in the use of proceeds and the
allocations set forth are only estimates, subject to adjustment in the opinion
of management based on events which may arise in the future.
Present Stockholders Will Derive Greater Benefits If We Are Successful And Have
Less Risk.
Present stockholders will benefit from a disproportionately greater
share of R-Tec, if successful, while investors in this offering risk a
disproportional greater loss of cash invested if R-Tec is not successful. Three
of our officers and directors collectively have given total consideration of
$569,150 for the 2,916,666 presently outstanding shares of R-Tec's common stock.
Additionally Muriel Kaiser received 100,000 shares in partial payment for
R-Tec's patent. Investors in this offering will pay a total purchase price of
$10,000,000, assuming all 1,250,000 shares are sold. The present shareholders
will own 70.70% of the outstanding shares and investors in this offering will
own 29.30% of the outstanding shares.
Offering Proceeds to Benefit Officers, Directors and Related Parties.
A portion of the proceeds from this offering may be used to pay debt
to our officers, directors and related parties rather than to fund operations or
implement our business plan. R-Tec Technologies, Inc. issued four Promissory
Notes to its officers, directors and related parties On May 26, 1999, sums due
pursuant to the notes to Mr. Lacqua, Ms. Vitolo and Mr. Scola were reduced or
reclassified as equity. As of June 30, 1999, $22,036 was owed to shareholders
for reimbursement of expenses incurred since May 26, 1999.
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.
Due To Our Lack Of An Independent Compensation Committee, Salaries May Be Set By
The Majority Stockholders.
The majority shareholders may set the salaries or other compensation
of officers and employees without the objective opinion of an independent
compensation committee. The officers of the company are still bound by their
fiduciary duties to act in the best interest of the company but there is no
assurance that they will act as impartially as an independent compensation
committee would.
6
<PAGE>
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.
Our Offering Price Has Been Arbitrarily Determined
We have unilaterally and arbitrarily determined the offering price.
The value of the common stock as determined by any subsequent market for the
common stock may be may much less than the price paid by you .
Recent Developments
On February 24, 1999, a press release was issued by R-Tec for
distribution on the Internet which contained several inaccurate statements or
statements which require clarification. The press release stated inaccurately
that R-Tec obtained worldwide recognition with its global patent which was filed
in 104 countries. In fact, the recognition referred to was R-Tec's patent
application which was filed in 96 countries. The press release statement that
R-Tec's products were "revolutionary" and its technology instrumental in
reducing CFC emissions and global warming were based on the opinions of Shawn P.
Walsh, a consultant to R-Tec and a director. However, R-Tec's products are not
yet in consumer use and have never been instrumental in reducing CFC emissions
or global warming. The press release also stated inaccurately that Underwriters
Laboratories were unable to produce a standard for R-Tec's technology because it
is so advanced. In fact, Underwriters Laboratories stated that it did not have a
published standard with which to evaluate R-Tec's R-Tect 22 product due to the
uniqueness of this product. Finally, the reference in the press release to a
contact by Deputy Commissioner of New York City Environmental Protection Agency
failed to indicate that his evaluation of R-Tec's products was based on
statements made to him by R-Tec concerning the product's performance and
efficacy.
Where You Can Find Additional Information
In connection with the offering of the common stock, R-Tec has filed
a registration statement with the Securities and Exchange Commission. There is
additional information concerning R-Tec contained in the registration statement
that is not contained in this prospectus. In addition, beginning with the
effective date of this prospectus, we will be required to file annual quarterly
and special reports and proxy statements with the SEC. You may read and copy any
document we file at the SEC's- Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or may view them on the SEC worldwide web site at
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.
7
<PAGE>
Dilution
As of June 30, 1999, R-Tec's common stock had a deficit in net
tangible book value of $(590,805) or approximately $(.20) 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 June 30,
1999, as adjusted to give effect to this offering.
<TABLE>
<CAPTION>
1,250,000 shares 625,000 shares 125,000 shares
sold sold sold
<S> <C> <C> <C>
Assuming a public offering price of $8.00 $8.00 $8.00
Net proceeds to R-Tec $8,620,000.00 $4,275,000.00 $790,000.00
Net tangible book deficit per share for existing ($0.20) ($0.20) ($0.20)
shareholders before offering
Increase per share attributable to payment of $2.08 $1.21 $0.26
shares purchased by new investors
Pro forma net tangible book value after offering $1.88 $1.01 $0.06
Dilution per share to new investors $6.12 $6.99 $7.94
</TABLE>
The following chart illustrates the pro-forma proportionate
ownership in R-Tec, upon completion of the offering of present stockholders and
of investors in this offering, compared to the relative amounts paid and
contributed to capital of R-Tec by present stockholders and by investors in this
offering, assuming no changes in net tangible book value other than those
resulting from the offering.
<TABLE>
<CAPTION>
Shares Issued Total Consideration Average Price
Number Percent Amount Percent Per Share
<S> <C> <C> <C> <C> <C>
Present Stockholders 3,016,666 70.70% $ 569,000 5.38% $ 0.19
New Investors Maximum 1,250,000 29.30% $10,000,000 94.62% $ 8.00
Present Stockholders 3,016,666 96.02% $ 569,000 85.05% $ 0.19
New Investors Minimum 125,000 3.98% $ 1,000,000 14.95% $ 8.00
</TABLE>
Use of Proceeds
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.
8
<PAGE>
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.
o Existing Debt of approximately $60,000.
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 36 to 48 months without revenue.
ESTIMATED
PERCENT OF
PURPOSE AMOUNT PROCEEDS
Research and Development Activities $2,371,080.00 27.51%
Salary Expense 2,135,000.00 24.77%
Parts and Supplies Expense 800,000.00 9.28%
Office Expense 1,853,920.00 21.51%
Patent Expense 450,000.00 5.22%
Sales and Marketing Expense 500,000.00 5.80%
Travel Expense 100,000.00 1.16%
Insurance Expense 350,000.00 4.06%
Existing Debt 60,000.00 .70%
TOTAL $8,620,000.00 100%
Offering Expenses 380,000.00
Commissions 1,000,000.00
The chart below represents the use of proceeds if the 625,000 shares
offered are sold. Sale of the 625,000 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 1,679,920.00 39.41%
Salaries Expense 1,100,000.00 25.73%
Parts and Supplies Expense 226,160.00 5.29%
Office Expense 353,920.00 8.28%
Sales and Marketing Expense 200,000.00 4.68%
Patent Expense 450,000.00 10.53%
Travel Expense 50,000.00 1.17%
Insurance Expense 150,000.00 3.51%
Existing Debt 60,000.00 1.40%
Total $4,270,000.00 100.00%
Offering Expenses 230,000.00
Possible Commissions 500,000.00
The chart below represents the use of proceeds if the Minimum number
of shares offered are sold. Mr. Scola, Mr. Lacqua
9
<PAGE>
and Ms. Vitolo would defer a portion of their salaries, if necessary, until
sufficient funds were available. We may be able to retain our present employees
and hire three additional employees for $82,500 within the budget stated below.
If the anticipated budget is inadequate, we will hire the additional employees
and defer officers' salaries to the extent necessary. Sale of the 125,000
shares offered would provide sufficient funds for R-Tec to operate 12 months
without revenue.
ESTIMATED
PERCENT OF
PURPOSE AMOUNT PROCEEDS
Research and Development Activities 150,000.00 18.99%
Salaries Expense 232,500.00 29.43%
Parts and Supplies Expense 80,000.00 10.13%
Office Expense 150,000.00 18.99%
Sales and Marketing Expense 90,000.00 11.39%
Patent Expense 27,500.00 3.48%
Travel Expense 20,000.00 2.53%
Insurance Expense 40,000.00 5.06%
Existing Debt 0 0.00%
Total $790,000.00 100.00%
Offering Expenses 110,000.00
Commissions 100,000.00
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 36 to 48 months following completion of this offering.
If only the minimum is sold, R-Tec believes it will be able to operate for 12
months if no revenue is generated from its operations. We had originally
estimated that R-Tec could operate 24-36 months without revenues if $10,000,000
of common stock were sold and 24 months if $5,000,000 of common stock were sold.
We have increased our estimates of the periods we can operate without revenue
upon raising $10,000,000 to 36 to 48 months, and 24 to 36 months if we raise
$5,000,000. This increase is based on our decision to develop fewer new products
and reduce the salaries of Mr. Scola, Mr. Lacqua and Mrs. Vitolo to $50,000
each. In the event R-Tec had no revenues, the money raised could sustain R-Tec
longer because fewer research and development projects would be undertaken
initially, and as a result of the officers' salaries reduction, more funds were
available to pay the salaries of other employees.
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.
$450,000 payable in full thirty (30) days from the date R-Tec sells $2,000,000
of common stock; or if $2,000,000 of common shares is not sold before May 1,
2000, beginning May 1, 2000, accrued interest payable quarterly for two (2)
years until May 1, 2002, at which time the R-Tec will make quarterly payments of
$22,500 in principal and accrued interest until paid in full. The note bears
interest at the rate of 6% per annum.
A portion of the proceeds will be used to repay a promissory note to
an unrelated third party in the principal amount of $60,000 bearing interest at
8.5% per annum. Under the terms of the note accrued interest is due monthly with
the entire principal amount is due at such time as R-Tec sells $2,000,000 of
shares in this offering or November 15, 2000, which ever occurs first.
Any portion of the net proceeds not required for immediate
expenditure will be deposited in R-Tec's corporate checking
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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.
June 30, 1999 December 31, 1998
(unaudited)
Total Assets $1,060,904 904,500
Total Liabilities 619,722 821,147
Stockholders Equity 441,182 83,353
Net Tangible Book Value (590,805) (776,647)
Net Tangible Book Value per share $ (0.20) $ (0.27)
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 December , 2000. 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 financing may be significantly more
favorable than those of the shares sold in the offering. R-Tec does not have any
material committed sources of additional financing, and there can be no
assurance that additional funding, if necessary, will be available on acceptable
terms, if at all. If adequate funds are not available, 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
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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 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
patents. 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 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
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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 January, 2000 at an additional cost of $50,000.
During Phase 1, we will incur significant operating expenses.
$450,000 due for patent acquisition at such time as R-Tec raises at least
$2,000,000 in this offering may 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.
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Manufacturing and Distribution Relationships.
One of R-Tec's Phase 1 goals is to establish beneficial
relationships with strategic manufacturing and distribution partners. With this
strategy, we hope to eliminate the need to build a large and costly production
and sales infrastructure and to benefit from the inclusion of our products in
our partners' marketing efforts.
R-Tec has entered into a manufacturing contract with Anscott
Chemical Industries, Inc., a nationally recognized manufacturer of chemical
products located in Wayne, New Jersey.
Anscott will be the exclusive manufacturer of our leak detection
products; R-Tect 12, R-Tect 22, and R-Tect carbon dioxide reactive paints. The
agreement is for five years. The rights granted to Anscott under the agreement
are limited to these three specified products and to the United States.
Anscott's exclusivity rights with respect to R-Tect carbon dioxide reactive
paint is further limited to the dry cleaning industry. Anscott will manufacture
our products based on purchase orders received from R-Tec. R-Tec intends to
locate a quality control technician employed by us at Anscott's offices, but
there is no provision in our contract with Anscott which requires Anscott to
accept such supervision.
We reached a distribution agreement with Motors & Armatures on March
26, 1999. 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. The original anticipated delivery
date of R-Tect 22 to Motors & Armatures of October 31, 1999, has been extended
to February, 2000. 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.
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We also believe our reactive paint products could be used in the
aerospace and aviation markets. We believe that aircraft utilizing our reactive
paint products could possibly avert disasters caused by gas and fluid leaks if,
during a routine inspection, a mechanic notes a change in color of the paints
applied to pipe joints aboard the aircraft. Should there be a leak, it could
be detected and repaired prior to the aircraft taking off.
It is possible, though unlikely, that our paint could be caused to
change color due to exposure to some other substances or gas from another
source. A false positive reading due to ambient gases is minimized by the use of
a clear polymer coating, which encases each of the R-Tec paints. When properly
applied, the paint's impermeable coating serves to ensure that only gas leaking
from the protected source can contact the reactive paint and therefore cause a
positive reading. None of the testing conducted to date has indicated any
variance of responsiveness of R-Tec's products to geographic area or weather
conditions, such as humidity, air pressure or smog level.
Phase 2-Expand Product Lines and Expand Internal Sales
R-Tec anticipates that it will add product lines in Phase 2 which
will be marketed to the users identified in Phase 1. R-Tec will continue to
pursue new business with public utilities by developing new products which
address specific needs with the industry.
The speed with which we can develop, introduce, test market and
expand sales of the additions to the R-Tec product line will determine the
timing of the realization of our Phase 2 goals. This phase will be characterized
by new product introductions, test marketing, expanded sales efforts, and
industry driven mandates for the use of R-Tec products.
During Phase 2, in addition to manufacturing facilities, office
space and warehouse space required during Phase 1, R-Tec will require laboratory
facilities for product development.
During Phase 2, R-Tec will develop additional gas detection coating
products.
o R-Tect ethylene detector. The estimated development time is 90 days at an
approximate cost of $70,000.
o R-Tect propane reactive paint. The estimated development time is 90 days at
a cost of approximately $100,000.
o R-Tect natural gas reactive paint. The estimated development time is 90 days
at an estimated development cost of approximately $200,000.
o R-Tect SF6 detector. The estimated development time is 90 days at an
estimated development cost of approximately $200,000.
o R-Tect 134A, a freon detecting coating designed for the automotive, air
conditioning and refrigerator contractors market. The estimated development
time is 180 days at an approximate cost of $55,000.
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-Tec
would only develop R-Tect propane reactive paint.
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
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We also intend to research the feasibility of using a small strip
across the top of wrapped chicken parts and meat as a means of measuring
freshness. This fine lined strip would be the color green, indicating the
chicken is fresh. If this strip turns red, this would indicate that the chicken
is diseased or tainted with salmonella. This would alert both the retailer and
the consumer to the presence of a disease that might not have been detected
without this safety strip.
We intend to work with utility companies on the detection of SF6
gas. This gas is used as an insulator in transformers and takes the place of
harmful PCBs. When these gases leak out of a transformer, they may cause the
electricity passing through the gas to spark and cause an explosion. Currently,
the only way the utility company can detect a leak is when the transformer
explodes and it must be replaced at great cost to utility companies and the
consumer. R-Tec proposes that when a transformer is assembled, the utility
company place a strip of our paint around the top of the transformer so that
utility workers will be able to easily detect a change in the color of a
transformer hanging on a utility pole, if a leak occurs.
Blood Gases
R-Tec believes there may be an interest in the use of our
technology in the field of blood gases. Blood travels from the heart to the
lungs, liver, kidneys and other major organs. During this trip it is carrying a
percentage of oxygen, carbon dioxide and certain other metabolic gases. However,
when there is a restriction in this flow, possibly due to coronary artery
disease, the heart and lungs are unable to supply the proper amount of oxygen to
the blood. Therefore, the oxygen level begins to decrease and the carbon dioxide
level will increase.
R-Tec believes that by detecting gas on a molecular basis at the
rate of -10 to the 64th power, the medical field may have the ability to detect
a change in the amount of carbon dioxide in the blood. This may help patients
with a family history or high risk of heart attacks or strokes to possibly know
if they have a serious medical condition. For example, a person might be able to
rub some gel on their wrist once a month. This gel would consist of a form of
R-Tec's product and dimethyl sulfoxide, a substance that carries medicine into
the body. If the blood flowing through the arterial arteries has a higher than
normal level of carbon dioxide, which is indicative of a restriction of blood
flow and oxygen, the gel would turn from one color to another, possibly 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. In the event all of the shares offered are sold, we plan to hire
approximately 20-30 additional full-time employees. If the minimum is sold, we
expect to hire three additional employees, for a total of seven 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 month to month lease.
Management believes that R-Tec's existing offices are unsuitable and
inadequate for their future needs. However, in the event R-Tec raises only the
minimum offered, its will continue to occupy its present facilities. 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.
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Patent
R-Tec's gas detecting coating technology is the invention of Robert
J Verdicchio, Stewart R Kaiser, and Shawn Walsh. Their invention is protected by
U.S. patent #5783110, issued July 21, 1998, entitled, Composition for the
Detection of Electrophilic Gases and Methods of Use Thereof. The patent
describes a coating which detects gases, such as chlorodifluoromethane or carbon
dioxide, which are attracted to electrons. Upon contact with such gases, protons
are exchanged between the gas and the paint. The loss or gain of protons causes
a dye incorporated in the paint to change color, indicating the presence of gas.
R-Tec also has two pending U.S. patent applications which, if granted would
expand the scope of present patent. R-Tec has foreign patent applications
pending for 32 countries.
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. On September 28, 1999, the note
was further modified by providing for payment of $400,000 of the total due by
the issuance of 100,000 R-Tec shares with the remaining $450,000 being due
within thirty days of R-Tec selling $2,000,000 of its shares in this offering.
In the event $2,000,000 of common shares are not sold before May 1, 2000, the
patent note will be paid beginning May 1, 2000 by the payment of accrued
interest payable quarterly for two (2) years until May 1, 2002, at which time
the R-Tec will make quarterly payments of $22,500 in principal and accrued
interest until paid in full.
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 original 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.
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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 51 President, Treasurer and
1127 83rd Street Director
Brooklyn, New York 11228
Nancy Vitolo 36 Vice President, Secretary
290 Green Road and Director
Sparta, New Jersey 07871
Marc M. Scola 33 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. We have no independent
compensation committee.
Philip Lacqua, age 51, 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
19
<PAGE>
loaned Mrs. Kaiser approximately $425,000 to fund the development of the patent.
Marc M. Scola, age 33, 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.
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 33, 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.
20
<PAGE>
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 has not paid any compensation since its incorporation to its
executive officers and directors. We have no independent compensation committee.
R-Tec has entered into employment agreements dated September 23, 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 $50,000 plus
bonus per year for a two-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 September 23, 1999.
The employment agreement with Ms. Vitolo provides for the payment
of $50,000 plus bonus per year for a two-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 September 23, 1999.
The employment agreement with Mr. Lacqua provides for the payment
of $50,000 plus bonus per year 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 September 23, 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 12 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, $2,135,000 represents
an estimate of the total employee compensation for 36 to 48 months, including
salaries for its officers and staff. The consulting agreements in effect do not
cover full-time employment by these consultants, which must be negotiated at the
appropriate time in the future.
21
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Name Other Securities
and Annual Restricted Underlying LTIP All Other
Principal Compen- Stock Options/ Payouts Compen-
Position Year Salary($) Bonus($) sation($) Awards ($) SARs ($) sation($)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Philip Lacqua 1997 --- --- ---- ---- ---- ---- ----
President, Treasurer 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Nancy Vitolo 1997 --- --- ---- ---- ---- ---- ----
Secretary 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Marc M. Scola 1997 --- --- ---- ---- ---- ---- ----
General Counsel 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Damon E. Palmer 1997 --- --- ---- ---- ---- ---- ----
Director 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Shawn P. Walsh 1997 --- --- ---- ---- ---- ---- ----
Director 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
</TABLE>
Principal Shareholders
The following table presents the shares of common stock of R-Tec
owned of record or beneficially by each person known to own more than 5% of
R-Tec's common stock, and the name and shareholdings of each officer and
director and all officers and directors as a group.
<TABLE>
<CAPTION>
Percent After Percent After
Principal Stockholder's Number of Percent Prior Minimum Maximum
Name and Addresses Shares Owned to Offering Offering Offering Office(s) Held
<S> <C> <C> <C> <C> <C>
Philip Lacqua 972,222 32.23% 30.95% 22.79% Director,
1127 83rd Street President,
Brooklyn, New York 11228 Treasurer
Nancy Vitolo 972,222 32.23% 30.95% 22.79% Director,
290 Green Road Vice President,
Sparta, New Jersey 07871 Secretary
Marc M. Scola 972,222 32.23% 30.95% 22.79% 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 2,916,666 96.69% 92.84% 68.36%
</TABLE>
22
<PAGE>
Certain Relationships and Related Transactions
Mr. Lacqua, Ms. Vitolo and Mr. Scola own 2,916,666 shares. The
contributed $569,150 in capital through June 30, 1999. As of June 30, 1999,
$61,807 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 agreed that in the event
625,000shares were not sold by January 10, 2000, payment would 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. On September 28,
1999, the note was further modified by providing for payment of $400,000 of the
total due by the issuance of 100,000 R-Tec shares with the remaining $450,000
being due within thirty days of R-Tec selling $2,000,000 of its shares in this
offering. In the event $2,000,000 of common shares are not sold before May 1,
2000, the patent note will be paid beginning May 1, 2000 by the payment of
accrued interest payable quarterly for two (2) years until May 1, 2002, at which
time the R-Tec will make quarterly payments of $22,500 in principal and accrued
interest until paid in full.
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. As of June 30, 1999, $22,036 was owed to shareholders
for reimbursement of expenses incurred since May 26, 1999.
On September 21, 1999, R-Tec entered into a consulting agreement
with Stenton Leigh Captial Corp. of Boca Raton, Florida to provide financial
consulting services. The consulting agreement provides that Stenton Leigh will
be paid $5,000 per month until September 20, 2000 beginning at such time as
R-Tec has raised $2,000,000 in this offering.
On September 25, 1999, our executive officers, Mr. Lacqua, Mr.
Scola and Ms. Vitolo transferred 12,083,334 common shares to the Company,
reducing the total number of shares held be them as a group to 2,916,666.
R-Tec presently has two independent directors. The transactions
noted above were ratified by these independent directors who do not have an
interest in the transactions. Any future transactions undertaken by R-Tec with
its officers, directors or 5% shareholders will be on terms no less favorable to
R-Tec than could be obtained from unaffiliated parties.
Indemnification
R-Tec's Articles of Incorporation, as amended, provide that, to the
extent not inconsistent with applicable law, R-Tec shall indemnify and hold
harmless its officers, directors, employees and agents from liability and
reasonable expense from actions in which he or she may become involved by reason
of the fact that he or she was an officer, director, employee or agent. We
expect to obtain an insurance liability policy for this purpose at a cost of
approximately $25,000 - $80,000 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
23
<PAGE>
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 or early 2000.
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 3,016,666 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 3,016,666 shares issued and outstanding, and a
maximum of 1,250,000 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.
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
4,266,666 shares of common stock outstanding.
24
<PAGE>
Of these shares, the 1,250,000 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 3,016,666 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 125,000 shares and a maximum of
1,250,000 shares of common stock through it officers and directors and placement
agent 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. From August 5, 1999 until September 24, 1999,
the terms of the escrow agreement provided that funds would not be released from
escrow until $5,000,000 were raised. $549,720.00 was held in escrow on October
8, 1999. On September 25, 1999, our executive officers, Mr. Lacqua, Mr. Scola
and Ms. Vitolo transferred 12,083,334 common shares to the Company.
Simultaneously, we reduced the number of shares offered from 3,750,000 to
1,250,000 common shares. Investors who purchased prior to the date of this
prospectus will receive a complete refund of their investment with interest and
may reinvest pursuant to this prospectus.
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 1,250,000 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.
On September 21, 1999, R-Tec entered into a best efforts agency
agreement with Thornhill Group, Inc. of Boca Raton, Florida, under which
Thornhill agreed to act as exclusive placement agent for this offering. The
agreement provides that Thornhill will be paid:
o 10% of the gross proceeds of the offering as commission
o 3% of the gross proceeds of the offering as a non-allocable expense allowance
o Warrants to purchase 12,500 shares for $8.00 per share for every $1,000,000
in gross proceeds raised by the Company.
Additionally, the agency agreement grants Thornhill the right to act
as the Company's non-exclusive placement agent for a period of two years
following the conclusion of this offering and to appoint one member to R-Tec's
board.
Under Rule 3a4-1 of the Exchange Act, none of the 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.
25
<PAGE>
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.
The offering price has not been determined by negotiation with an
underwriter, as is customary in most offerings, and instead the offering price
has been set arbitrarily by R-Tec.
Legal Matters
To the knowledge of management there is no material litigation
pending or threatened against R-Tec. Legal counsel for R-Tec in connection with
this offering is Brashear & Associates, P.L., 926 N.W. 13th Street, Gainesville,
FL 32601.
Experts
The financial statements of R-Tec as of December 31, 1998, included
in this prospectus have been audited by James Moore & Co. P.L., independent
certified public accountants, as indicated in their report with respect thereto,
and are included herein in reliance on such report given upon the authority of
that firm as experts in accounting and auditing.
Change In Independent Accountants
On May 21, 1999, R-Tec engaged James Moore & Co., P.L. as its
independent auditors for the year ending December 31, 1998 to replace the firm
of Jurewicz & Duca, Certified Public Accountants, P.C., who were dismissed as
our auditors effective May 20, 1999. James Moore & Co., P.L. reaudited the
financial statements for the year ended December 31, 1998; no reliance should be
placed on previous financial statements for the same period. R-Tec's Board of
Directors approved the decision to change auditors.
The reports of Jurewicz & Duca, P.C., on the financial statements of
R-Tec from October 29, 1998 (inception) to December 31, 1998 did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. Subsequent to the issuance
of the audit report of Jurewicz & Duca, P.C., information came to the attention
of Jurewicz & Duca, P.C. which they have concluded materially impacts the
fairness and reliability of their audit report and the underlying financial
statements. Due to the dismissal of Jurewicz & Duca, P.C., they have not
addressed these issues and therefore have withdrawn their audit report dated
January 7, 1999. No reliance should be placed on
26
<PAGE>
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.
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.
27
<PAGE>
COMMON STOCK PURCHASE AGREEMENT
TO: R-Tec Technologies, Inc., Escrow, P.O. Box 282, 61 Mallard Drive,
Allamuchy, New Jersey 07820.
Telephone: (908) 850-8593
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 DATED NOVEMBER ___, 1999, 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:________________________________
Please check one of the following:
___ My income has exceeded $200,000 for the last 2 years and I expect my
income to exceed $200,000 this year.
___ My income has not exceeded $200,000 for the last 2 years.
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:____________________________
Broker Account Number:_____________________________________________________
28
<PAGE>
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, 61 Mallard Drive,
Allamuchy, New Jersey 07820
1(888) 299-7832
Incomplete Forms will be returned to Sender.
30
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors,
R-Tec Technologies, Inc.:
We have audited the accompanying balance sheet of R-Tec Technologies, Inc. (a
development stage company), as of December 31, 1998, and the related statements
of operations, stockholders' equity and cash flows for the period from inception
(October 22, 1998) through December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of R-Tec Technologies, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for the
period from inception (October 22, 1998) through December 31, 1998 in conformity
with generally accepted accounting principles.
As more fully described in Note 9 to the financial statements, subsequent to the
issuance of the Company's 1998 financial statements and an audit report thereon
dated January 7, 1999, certain errors were discovered by management. These
errors resulted in an overstatement of previously reported organizational costs
and an understatement of previously reported deferred offering costs as of
December 31, 1998. In addition, an agreement to acquire a patent and agreements
to repay stockholders for certain organizational expenses were subsequently
significantly modified by management of the Company. Accordingly, the 1998
financial statements have been restated to correct these errors and significant
modifications.
Gainesville, Florida
May 25, 1999, except for Note 10,
as to which the date is September 29, 1999
F-1
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
------
June 30, December 31,
1999 1998
-------- ------------
(Unaudited)
Current assets
Cash and cash equivalents $ 16,834 $ 43,500
---------- --------
Equipment 10,083 -
---------- --------
Other assets
Patent 826,945 815,000
Deferred offering costs 205,042 45,000
Deposits 2,000 1,000
-------- --------
Total other assets 1,033,987 861,000
========== ========
Total Assets $1,060,904 $904,500
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 99,686 $ 7,147
Due to stockholder 22,036 -
Notes payable 498,000 414,000
---------- --------
Total current liabilities 619,722 421,147
Commitments and contingencies (Note 3)
Stockholders' equity
Common stock, par value $.00001 per
share, 50,000,000 shares authorized,
2,916,666 shares issued and outstanding 29 29
Due from stockholders (61,807) (96,160)
Common stock payable 400,000 400,000
Additional paid-in capital 569,121 419,971
Deficit accumulated during the development (466,161) (240,487)
stage ---------- --------
Total stockholders' equity 441,182 483,353
---------- --------
Total Liabilities and Stockholders' Equity $1,060,904 $904,500
========== ========
F-2
The accompanying notes to financial statements
are an integral part of these statements
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Inception
(October 22, Inception
1998) (October 22,
Six-Month Through 1998)
Period Ended December 31, Through
June 30, 1999 1998 June 30, 1999
--------------- --------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenues $ - $ - $ -
-------------- --------------- --------------
Expenses
Administrative fees to stockholders 34,000 231,000 265,000
Administrative and start-up 167,674 5,487 173,161
Interest expense 24,000 4,000 28,000
-------------- --------------- --------------
Total expenses 225,674 240,487 466,161
============== =============== ==============
Net loss $ (225,674) $ (240,487) $ (466,161)
============== =============== ==============
Net loss per common share $ (.08) $ (.08) $ (.16)
============== =============== ==============
Weighted average common shares outstanding 2,916,666 2,916,666 2,916,666
============== =============== ==============
</TABLE>
The accompanying notes financial statements
are an integral part of these statements
F-3
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the Total
Common Stock Paid-In Due from Common Stock Development Stockholders'
Shares Par Value Capital Stockholders Payable Stage Equity
------------------- ---------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial capitalization, October 1998 2,916,666 $ - $ - $ - $ - $ - $ -
Additional capital contributed by
stockholders, October 1998
through December 1998 - 29 419,971 (96,160) - - 323,840
Purchase of patent - - - - 400,000 - 400,000
Net loss - - - - - (240,487) (240,487)
--------- -------- ----------- ----------- ----------- ---------- -------------
Balance, December 31, 1998 2,916,666 29 419,971 (96,160) 400,000 (240,487) 483,353
Additional capital
contributed by stockholders
January 1999 through March
1999 (Unaudited) - - - - - - -
--------- -------- ----------- ----------- ----------- ----------- -----------
Additional capital contributed
by stockholders April through
June 1999 (Unaudited) - - 29,150 14,050 - - 43,200
Net loss (Unaudited) - - - - - (225,674) 225,674)
Balance, June 30, 1999 ========= ======== =========== ============ ========== ============ =============
(Unaudited) 2,916,666 $ 29 $ 569,121 $ (61,807) $ 400,000 $ (466,161) $ 441,182
========= ======== =========== ============ ========== ============ =============
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
F-4
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Increase (Decrease) In Cash and Cash Equivalents
<TABLE>
<CAPTION>
Inception
(October 22, Inception
1998) (October 22,
Six-Month Through 1998)
Period Ended December 31, Through
June 30, 1999 1998 June 30, 1999
------------------ ----------------- -----------------
(Unaudited (Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities $ (225,674) $ (240,487) $ (466,161)
Net loss ------------------ ----------------- -----------------
Adjustments to reconcile net loss to
net cash used in operating activities:
Unreimbursed expenses contributed to
capital by shareholders 14,500 231,000 245,500
Interest expense - amortization of
discount on note payable 24,000 4,000 28,000
Increase in deposits (1,000) (1,000) (2,000)
Increase in accounts payable 52,539 147 52,686
Increase in due to stockholders 22,036 - 22,036
------------------ ----------------- -----------------
Total adjustments 112,075 234,147 346,222
------------------ ----------------- -----------------
Net cash used in operating activities (113,599) (6,340) (119,939)
Cash flows from investing activities ------------------ ----------------- -----------------
Patent costs (5,945) (5,000) (10,945)
Purchase of equipment (10,083) - (10,083)
Net cash used in investing activities (16,028) (5,000) (21,028)
----------------- ----------------- -----------------
Cash flows from financing activities
Increase in deferred offering costs (126,042) (38,000) (164,042)
Proceeds from note payable 60,000 - 60,000
Capital contributed by stockholders 169,003 92,840 261,843
Net cash provided by financing activities 102,961 54,840 157,801
Net increase (decrease) in cash ----------------- ----------------- ----------------
and cash equivalents (26,666) 43,500 16,834
Cash and cash equivalents, beginning of period 43,500 - -
----------------- ----------------- ----------------
Cash and cash equivalents, end of period $ 16,834 $ 43,500 $ 16,834
================= ================= ================
Supplemental disclosures of noncash
investing and financing activities
Purchase of patent with common stock and note payable $ - $ 810,000 $ 810,000
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-5
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(1) Summary of Significant Accounting Policies:
The following is a summary of the more significant accounting policies and
practices of R-Tec Technologies, Inc. (the Company) which affect the
accompanying financial statements.
(a) Organization and operations--The Company was incorporated on
October 22, 1998, to commercialize and advance the technology of a
recently obtained patent on a type of paint that can detect certain
gases. The Company plans to pursue other applications of this
technology.
(b) Presentation--The Company has devoted substantially all its efforts
to date to raising capital to commercialize its technology and has no
revenues. Therefore, these financial statements have been prepared in
accordance with Statement of Financial Accounting Standards No. 7
Accounting and Reporting by Development Stage Enterprises.
(c) Unaudited information--In the opinion of management, all
adjustments consisting only of normal recurring adjustments necessary
for a fair presentation of the financial position at June 30, 1999; the
results of operations and cash flows for the six months then ended; and
the results of operations and cash flows for the period from inception
though June 30, 1999, have been made. Operating results for the six
month period ended June 30, 1999, are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999.
(d) Use of estimates--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect certain
reported amounts and disclosures. Accordingly, actual results could
differ from those estimates.
(e) Cash and cash equivalents--For the purposes of reporting cash
flows, the Company considers all highly liquid investments with an
original maturity of three months or less to be cash equivalents.
(f) Equipment--Equipment is recorded at cost. No depreciation has been
recorded in the accompanying financial statements since the equipment
has not been placed in service.
(g) Deferred offering costs--Costs directly attributable to the
proposed stock offering as described in Note 2 are deferred and offset
against the proceeds from the offering if successful or expensed if the
offering is not successful.
(h) Patent--Patents are recorded at the cost of acquisition if
purchased or if developed internally, the accumulation of the direct
costs incurred to obtain the patent. No amortization has been recorded
in the accompanying financial statements since the patent has not been
placed in service.
(i) Deferred income taxes--Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective income tax bases.
Deferred tax assets and liabilities are measured using enacted rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
F-6
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(1) Summary of Significant Accounting Policies: (Continued)
(j) Loss per common share--Loss per common share is computed using the
weighted average of shares outstanding during each period presented in
accordance with Statement of Financial Accounting Standards No. 128
Earnings Per Share.
(k) Start-up costs--The initial costs incurred to organize the Company
are expensed when incurred.
(l) Advertising--Advertising costs are expensed when incurred.
(2) Proposed Public Offering of Common Stock:
The Company is offering up to 3,750,000 shares of its common stock for sale at
$8.00 per share, which is expected to raise between $5 to $30 million. The
Company subsequently amended its offering (see Note 11). There is no assurance
the offering will be successful.
(3) Commitments and Contingencies:
The Company has entered into a five year exclusive manufacturing agreement with
a specialty chemical manufacturer for certain of the Company's initial products
expiring in October 2003.
On April 14, 1999, the Company entered into five year employment contracts with
its three principal officers for total annual salaries of $990,000 beginning on
January 1, 1999. The terms of these agreements were modified in September 1999
(see Note 11).
On April 14, 1999, the Company adopted a stock bonus plan for certain classes of
employees and reserved 1,000,000 shares of its authorized but unissued common
stock under this plan. No stock options have been granted.
The Company has one year service contracts with two consultants beginning
January 1, 1999. The contracts specify a minimum payment of $1,000 per month.
The contracts can be cancelled with thirty days written notice by either party.
The Company expensed $3,500 and the consultants waived $8,500 in payments under
the contracts for the six months ended June 30, 1999.
The Company leases an office facility under a one year operating lease with a
monthly rent of $1,000. A second office is leased from a stockholder under a two
year lease at $2,000 per month. Rent expense was $10,000 for 1998 and $18,000
for the six months ended June 30, 1999.
F-7
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(4) Patent Acquisition and Notes Payable:
The Company purchased a patent from a related party (see Note 6) on December 1,
1998, the terms which were substantially modified in May 1999 and September 1999
(see Notes 9 and 10). The Company is obligated to issue 100,000 shares of the
Company's common stock valued at $400,000 (see Note 11) and issued a promissory
note in the amount of $450,000. The stock payable obligation is recorded at a
value of $4.00 per share which is 50% of the public offering price (see Note 2)
because the stock is under various trading restrictions. The promissory note is
initially non interest bearing and is due in full within thirty days of $2
million being raised in the proposed stock offering described in Note 2; or if
$2 million is not raised by May 1, 2000, then interest at 6% is payable
quarterly from May 1, 2000 until May 1, 2002 at which time quarterly payments of
$22,500 plus accrued interest are due until paid in full. As of the date of the
agreement, the patent, stock payable obligation and note payable have been
recorded at $810,000 which represents the net present value of the stock payable
obligation and note payable. The accompanying financial statements reflect the
new terms of this transaction.
In June 1999, the Company received $60,000 under a note payable. The promissory
note is due in full within thirty days of $2 million being raised in the
proposed stock offering described in Note 2; or if $2 million is not raised the
note is due in full on or before November 15, 2000. Interest at 8.5% is due
monthly.
(5) Income Taxes:
The Company has a deferred tax asset of approximately $75,000 at December 31,
1998, due to the net loss incurred since inception. Temporary differences giving
rise to deferred tax assets consist primarily of the deferral of substantially
all start-up expenses for income tax purposes. Management has provided a
valuation allowance equal to the amount of the deferred tax assets at December
31, 1998, due to the uncertainty of realization of the future benefit of these
future deductions. Therefore, no income tax provision or benefit is provided in
the accompanying statements of operations.
(6) Related Party Transactions:
Certain unreimbursed administrative expenses of the Company were incurred by two
shareholders, both before and after the Companys' incorporation on October 22,
1998. The Company recorded $14,500 and $231,000 as administrative fees to
stockholders and as an increase in additional paid in capital for the six months
ended June 30, 1999 and for the period ended December 31, 1998, respectively, in
the accompanying financial statements. The Company also expensed an additional
$19,500 as administrative fees to stockholders and an increase in due to
stockholders for the six months ended June 30, 1999.
The Company is owed $61,807 and $96,160 from stockholders for amounts due for
additional paid-in capital as of June 30, 1999 and December 31, 1998,
respectfully. These amounts have been reflected as a reduction in stockholders'
equity in the accompanying financial statements.
The Company purchased a patent under terms described in Note 4 from a relative
of a shareholder/officer of the Company. The Company owes this related party
100,000 shares of common stock and $450,000 at June 30, 1999.
F-8
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(7) Concentrations of Credit Risk:
Significant concentrations of credit risk for all financial instruments owned by
the Company are as follows:
(a) Demand deposits--The Company has demand deposits in one bank, which
are insured by the Federal Deposit Insurance Corporation (FDIC) up to
$100,000. The bank balance was $17,771 and $48,500 at June 30, 1999 and
December 31, 1998, respectively. The Company has no policy of requiring
collateral or other security to support its deposits.
(b) Due from stockholders--The Company is owed $61,807 from one
stockholder at June 30, 1999, and $96,160 from two stockholders at
December 31, 1998. The Company has no policy of requiring collateral or
other security to support these amounts.
(8) Fair Value of Financial Instruments:
Statement of Financial Accounting Standards No. 107 Disclosures about Fair
Values of Financial Instruments requires disclosure of fair value to the extent
practicable for financial instruments which are recognized or unrecognized in
the balance sheet. The fair value disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the
fair value amount consider the tax consequences of realization or settlement.
The following table summarizes financial instruments by individual balance sheet
account as of December 31, 1998:
Carring
Amount Fair Amount
----------- ---------------
Financial Assets
Cash and cash equivalents $ 43,500 $ 43,500
Due from stockholders 96,160 96,160
----------- ---------------
Total financial assets $ 139,660 $ 139,660
=========== ===============
Financial Liabilities
Accounts payable $ 7,147 $ 7,147
Notes payable 414,000 450,000
Common stock payable 400,000 400,000
----------- ---------------
Total financial liabilities $ 821,147 $ 857,147
=========== ===============
The fair value of financial instruments approximates carrying value due to the
short-term maturity of the instruments.
F-9
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(9) May 1999 Restatement of Previously Issued Audited Financial Statements:
-----------------------------------------------------------------------
Subsequent to the issuance of the Company's 1998 financial statements and an
audit report thereon dated January 7, 1999, certain errors were discovered by
management. These errors resulted in an overstatement of previously reported
organizational costs and an understatement of previously reported deferred
offering costs as of December 31, 1998. In addition, an agreement to acquire a
patent and agreements to repay stockholders for certain organizational expenses
were subsequently significantly modified by management of the Company.
Accordingly, the 1998 financial statements have been restated to correct these
errors and significant modifications. The effect of these errors and changes was
to increase the net loss and deficit accumulated during the development stage by
$227,065, decrease total assets by $456,854, decrease total liabilities by
$553,626 and increase paid-in capital by $323,837. Components of these errors
and changes and their effect on net income and earnings (loss) per share are as
follows:
<TABLE>
<CAPTION>
Earnings
Income (Loss Per-
Amounts (Loss) Effect share Effect
--------- -------------- ------------
<S> <C> <C> <C>
Organization costs previously
capitalized - expensed in restatement $ 228,065 $ (228,065) $ (.08)
Organization costs previously
capitalized - reclassified as
deferred offering costs in restatement 45,000 - -
Patent costs previously expensed -
capitalized in restatement 5,000 5,000 -
Modification of patent acquisition agreement,
previously capitalized at $1- recorded at net
present value and corresponding obligation was
recorded in restatement 814,999 - -
Imputation of interest expense on patent
acquisition recorded in restatement 4,000 (4,000) (-)
Organization costs due to stockholders
under notes payable previously recorded -
eliminated in restatement 1,050,936 - -
Loans from stockholders previously recorded -
reclassified as paid-in capital in
restatement 323,840 - -
Additional capital due from stockholders
was recorded in restatement 96,160 - -
========= ============== ===========
Totals $ (227,065) $ (.08)
</TABLE>
F-10
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
The Company has restated its previously issued audited financial statements,
which were audited by other auditors and whose opinion was dated January 7,
1999. Any previously issued financial statements of the Company should not be
relied upon for any purpose.
(10) September 1999 Restatement of Previously Issued Financial Statements:
Subsequent to the issuance of the Company's 1998 financial statements and audit
report thereon dated May 25, 1999, certain agreements were modified that affect
the 1998 financial statements. The number of total shares outstanding has been
reduced from 15,000,000 to 2,916,666. In addition, the Company's $850,000
obligation under the note payable for patent acquisition was restructured and
replaced with an obligation to issue 100,000 shares of the Company's common
stock valued at $400,000 and a non interest bearing note payable in the amount
of $450,000. Accordingly, the 1998 financial statements have been restated to
reflect these modifications. The effect of this change was to increase the loss
per share by $(.06) for the period from inception (October 22, 1998) through
December 31, 1998.
(11) Subsequent Events (Unaudited):
The Company is currently amending its public offering as described in Note 2
to raise between $1 and $10 million by offering up to 1,250,000 shares of its
common stock for sale at $8.00 per share.
In connection with the proposed public offering as described in Note 2, the
Company entered into an agreement with a placement agent contingent on the
Company raising at least $1 million. The Company agreed to pay the placement
agent 13% of the amount raised and issued warrants to purchase 12,500 shares at
$8.00 per share on a pro rata basis for each $1 million raised. The warrants
expire in five years. The Company can cancel the agreement subject to a $100,000
breakup fee.
In connection with the proposed public offering as described in Note 2, the
Company entered into an agreement with a financial consultant contingent on the
Company raising at least $2 million in capital. The consultant will be paid
$5,000 per month plus expenses during the first twelve months following the
Company raising $2 million in capital. The agreement renews for an additional
year unless canceled at the end of the initial year.
The Company cancelled the April 1999 employment agreements with its three
principal officers as described in Note 3 and entered into three new five-year
agreements on September 23, 1999 for total annual salaries of $150,000 beginning
on the date of the agreement. The officers have waived all salaries through
September 29, 1999. No amounts have been reflected in the accompanying financial
statements because the Company is in the earliest phases of development.
F-11
<PAGE>
TABLE OF CONTENTS
Prospectus Summary 3
Risks Factors 5
Recent Developments 7
Where You Can Find
Additional Information 7
Dilution 8
Use of Proceeds 8
Selected Financial Data 12
Management's Discussion
and Analysis or Plan of Operation 12
Business 13
Management and Affiliates 19
Principal Shareholders 22
Certain Relationships
and Related Transactions 23
Description of Securities 24
Plan of Distribution 25
Legal Matters 26
Experts 26
Change in Independent Accountants 26
How to Invest in R-Tec 27
Financial Statements F-1
----------
R-Tec Technologies, Inc.
1,250,000 Shares Common Stock
$8.00 per share
-------------------------
Until February 17, 2000, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may be
required to deliver a prospectus. This is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters with respect to
their unsold allotments or subscriptions. This prospectus should be read in its
entirety by any prospective investor prior to his or her investment.
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution*
The following table sets forth the estimated costs and expenses to
be paid by R-Tec in connection with the offering described in the registration
statement.
SEC registration fee $ 8,340.00**
Blue sky fees and expenses $ 5,000.00
Printing and shipping expenses $ 20,000.00
Legal fees and expenses $ 15,000.00
Accounting fees and expenses $ 20,000.00
Transfer and escrow expenses $ 10,000.00
Advertising expenses and miscellaneous $ 10,000.00
-----------
Total $ 88,340.00
Total Costs to be deducted from offering proceeds $ 80,000.00
* All expenses except SEC registration fee are estimated.
** SEC registration fee was paid on behalf of R-Tec by officers and directors
of R-Tec and will not be reimbursed by R-Tec or deducted from the proceeds of
this offering. Other expenses of R-Tec's offering incurred prior to the filing
of Post-Effective Amendment No. 1 are not included inasmuch as they have been
paid on behalf of R-Tec by officers and directors and such costs will not be
reimbursed by R-Tec or deducted from the proceeds of this offering.
ITEM 14. Indemnification of Directors and Officers.
The Registrant's Articles of Incorporation, Article Eight, provide
that R-Tec shall indemnify and hold harmless its directors, employees and agents
from liability and reasonable expenses from actions in which he or she may
become involved by reason of the fact that he or she was an officer, director,
employee or agent.
Insofar as indemnification for liabilities arising under the
Securities Act, indemnification may be provided to directors, officers or
persons controlling the Registrant pursuant to the foregoing section. The
Registrant has been informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
ITEM 15. Recent Sales of Unregistered Securities.
On November 26, 1998, Mr. Lacqua, Ms. Vitolo and Mr. Scola received a total
of 15,000,000 shares in conjunction with formation of R-Tec Technologies, Inc.
They made capital contributions of $540,000 through March 31, 1999.
ITEM 16. Exhibits and Financial Statement Schedules
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
3.0* Certificate of Incorporation dated October 21, 1998.
3.1* Amended and Restated Articles of Incorporation, dated November 24, 1998.
3.2* Amended and Restated Articles of Incorporation, dated December 18, 1998.
3.3* Certificate of Amendment to the Certification of Incorporation of
R-Tec Technologies, Inc., dated April 18, 1999.
3.4* By-laws, dated November 4, 1998.
3.4a Amended Bylaws dated October 8, 1999.
3.5* R-Tec Technologies, Inc. Policy Against Insider Trading.
3.6* Form of common stock certificate.
5.0 Opinion and consent of Brashear & Associates, P.L.
10.0*Patent Assignment dated November 2, 1998 between Muriel Kaiser and R-Tec
Technologies, Inc.
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10.1* Patent Assignment dated March 30, 1999 between Muriel Kaiser and R-Tec
Technologies, Inc.
10.2* Promissory Note dated April 15, 1999 between Nancy Vitolo, Muriel
Kaiser and R-Tec Technologies, Inc.
10.4* Promissory Note dated April 15, 1999 between Nancy Vitolo and R-Tec
Technologies, Inc. for reimbursement of start up costs.
10.5* Promissory Note dated April 22, 1999 between Marc M. Scola and R-Tec
Technologies, Inc. for reimbursement of start up costs.
10.6* Promissory Note dated April 22, 1999 between Columbia Trading, Inc. and
R-Tec Technologies, Inc. for reimbursement of consulting fees and
start up costs.
10.7* Promissory Note dated April 22, 1999 between R-Tec Technologies,
Inc. and Marc M. Scola for reimbursement of office lease,
secretaries, postage, and other cost incurred, prior to
incorporation.
10.8* Expense Reimbursement Agreement between Marc M. Scola, Philip Lacqua and
Nancy Vitolo and R-Tec Technologies, Inc. dated October 24, 1998
regarding start up costs.
10.9* Employment Agreement between R-Tec Technologies, Inc. and Marc M. Scola.
10.10* Employment Agreement between R-Tec Technologies, Inc. and Nancy Vitolo.
10.11* Employment Agreement between R-Tec Technologies, Inc. and Philip Lacqua.
10.12* Consultant Agreement dated January 5, 1999 between Stewart Kaiser
and R-Tec Technologies, Inc.
10.13* Consultant Agreement dated January 11, 1999 between Shawn Walsh and
R-Tec Technologies, Inc.
10.14* Exclusive Manufacturer's Agreement dated October 21, 1998 between
Anscott Chemical Industries and R-Tec Technologies, Inc.
10.15* Distribution Agreement between R-Tec Technologies, Inc. and Motors &
Armatures Corp.
10.16* Stock Transfer Agency Agreement between R-Tec Technologies, Inc. and
Bank of New York dated as of January, 1999.
10.17* Subscription Escrow Agreement between R-Tec Technologies, Inc. and Bank
of New York dated as of January 26, 1999.
10.17a November 9, 1999 Addendum to the Subscription Escrow Agreement Between
R-Tec Technologies, Inc. and the Bank of New York.
10.18* Stock Option Plan adopted April 15, 1999.
10.19* Intellectual Property Evaluation dated May 31, 1999 by Intellectual
Property Valuators.
10.20* Promissory Note executed by Nancy Vitolo in favor of R-Tec
Technologies, Inc. in the original principal amount of $75,857 dated
May 10, 1999.
10.21* Promissory Note executed by R-Tec Technologies, Inc. in favor of
Muriel Kaiser in the original principal amount of $850,000 dated May
10, 1999.
10.22* Release regarding Patent dated May 10, 1999 between R-Tec Technologies,
Inc. and Muriel Kaiser.
10.23* R-Tec Resolution dated June 1, 1999.
10.24* Letter agreement with Muriel Kaiser dated July 2, 1999.
10.25* Letter dated July 6, 1999 waiving officers salaries in the event
minimum shares are sold.
10.26* Consulting Contract with Stenton Leigh Capital Corp. dated
September 21, 1999.
10.27* Proposed Agreement with Thornhill Group, Inc. dated September 21, 1999.
10.28* Employment Agreement of Marc Scola dated September 23, 1999.
10.29* Employment Agreement of Nancy C. Vitolo dated September 23, 1999.
10.30* Employment Agreement of Phillip Lacqua dated September 23, 1999.
10.31* Revised Escrow Agreement with Bank of New York.
10.32* Addendum to Patent Agreement of Muriel Kaiser dated May 10, 1999.
10.33* Promissory Note dated September 28, 1999 between Michael Selitto
and R-Tec Technologies, Inc.
16.00* Jurewicz and Duca's letter regarding change in independent
accountants dated June 15, 1999.
16.01* Jurewicz and Duca's letter regarding change in independent
accountants dated July 23, 1999.
23.0 Consent of James Moore & Co., L.P.
23.1* Consent of Property Valuations.
23.2* Consent of Property Valuations date July 22, 1999.
23.3* Consent of Motors and Armatures.
27.0* Financial Data Schedule.
* Previously filed
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<PAGE>
(b) FINANCIAL STATEMENT SCHEDULE
The Financial Statement Schedule as of June 30, 1999 and the Report of
Independent Public Accountants on such schedule are included in this
Registration Statement. All other schedules are omitted because they are not
applicable or are not required under Regulation S-X.
ITEM 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424 (b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs in contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That for the purpose of determining liability under the Securities Act
of 1933 each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements
required by Section 210.3-19 of this chapter at the start of any delayed
offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided that the registrant includes in the prospectus, by means of
a post-effective amendment, financial statements required pursuant to this
paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to
registration statements and information required by Section 10 (a)(3) of the Act
or Section 210.3-19 of this chapter if such financial statements and information
are contained in periodic reports filed with or furnished to the Commission by
the registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Form F-3.
(f) The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
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<PAGE>
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(i) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933,
(i) the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 42A (b)(1) or (4) or
497(h)under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determing any liability under the Securities Act of 1933,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post Effective Amendment No. 2 to Form S-1 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Allamuchy, State of New Jersey, on November 5, 1999.
R-Tec Technologies, Inc.
By: /s/ PHILLIP LACQUA
------------------------
Philip Lacqua
President and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST
EFFECTIVE AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
Signatures Title Date
/s/ PHILLIP LACQUA
__________________ President and November 5, 1999
Philip Lacqua Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Director
/s/ NANCY VITOLO
________________ Director November 5, 1999
Nancy Vitolo
/s/ MARC M. SCOLA
_________________ Director November 5, 1999
Marc M. Scola
________________ Director November , 1999
Damon E. Palmer
________________ Director November , 1999
Shawn P. Walsh
November 12, 1999
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549
RE: Registration Statement on Form S-1
R-Tec Technologies, Inc.
Ladies and Gentlemen:
We have acted as special counsel to R-Tec Technologies, Inc., a New
Jersey corporation (the "Company"), in connection with the public offering of up
to 1,250,000 common shares (the "Common Shares").
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended
(the "1933 Act").
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
such documents as we have deemed necessary or appropriate as a basis for the
opinions set forth herein, including (i) the Registration Statement of the
Company on Form S-1 relating to the Common Shares, filed with the Securities and
Exchange Commission (the "Commission") on June 11, 1999 (the "Registration
Statement"); (ii) the Articles of Incorporation and the Bylaws of the Company,
as amended to date; (iii) the form of voting Common Stock Certificate; (iv)
copies of certain resolutions (the "Resolutions") adopted by the Board of
Directors of the Company relating to the issuance of the Common Shares, the
filing of the Registration Statement and any amendments or supplements thereto
and related matters; and (v) such other documents as we have deemed necessary or
appropriate as a basis for the opinions set forth below.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of all natural persons, the authenticity of all documents
submitted to me as originals, the conformity to original documents of all
documents submitted to me as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed by parties other than the Company, we have
assumed that such parties had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents and the validity and binding effect thereof. As to any
facts material to the opinions expressed herein which were not independently
established or verified, we have relied upon oral or written statements and
representations of officers and other representatives of the Company and others.
The undersigned is admitted to the bar in the State of Florida, and
does not express any opinion as to the laws of any other jurisdiction, other
than the laws of the United States of America to the extent referred to
specifically herein.
Based on such examination, we are of the opinion that:
1. The Common Shares have been duly and validly authorized and, when
certificates therefor have been duly authenticated, delivered and paid for in
accordance with all applicable laws and agreements, will be duly and validly
issued, fully paid and nonassessable.
We consent to the use of this firm's name under the caption "Legal
Matters" in the Registration Statement, and to the filing of this opinion as an
exhibit to the Registration Statement. By giving you this opinion and consent,
we do not admit that we are experts with respect to any part of the Registration
Statement within the meaning of the term "expert" as used in Section 11 of the
1933 Act, or the rules and regulations promulgated thereunder, nor do we admit
that we are in the category of persons whose consent is required under Section 7
of the 1933 Act.
Sincerely,
BRASHEAR & ASSOCIATES, P.L.
/S/
-----------------------------
Bruce Brashear, Esq.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
(File No. 333-72405) of our report dated May 25, 1999, except for Note 10 as to
which the date is September 29, 1999, on our audit of the financial statements
of R-Tec Technologies, Inc. We also consent to the reference to our firm under
the caption "Experts."
/S/JAMES MOORE & CO., P.L.
Gainesville, Florida
November 11, 1999
ADDENDUM TO THE SUBSCRIPTION ESCROW AGREEMENT
BETWEEN R-TEC TECHNOLOGIES, INC. AND THE BANK OF NEW YORK
DATED AS OF JANUARY 26, 1999, ACCOUNT NO. 3014272
This Addendum, wherein same conflicts with the Subscription Escrow
Agreement, shall take precedence.
WHEREAS, R-TEC Technologies, Inc., has filed a Post Effective Amendment to
the Registration Statement with the Securities and Exchange Commission on
October 12, 1999, which added an Exclusive Placement Agent and several other
changes. The Post Effective Amended Registration Statement is not effective as
of this date. The Subscription Escrow Agreement shall be amended as follows:
1. All stock subscriptions will be held in Escrow Account No. 301472 until
125,000 shares or $1,000,000.00 has been accepted by the Company and
deposited into escrow.
2. If less than the minimum number of shares are subscribed within three (3)
months after the effective date of the Amended Registration Statement or
within six (6) 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 for
expenses.
3. The parties agree that The Bank of New York shall continue to
<PAGE>
act as Escrow Agent for R-TEC under the same terms as were previously set
forth in the January 26, 1999 Subscription Escrow Agreement as amended
subject to the Amended Registration Statement for a period of three (3)
months from the new effective date unless extended by R-TEC for an
additional three (3) month period.
4. R-TEC will provide Escrow Agent with a copy of the Securities and Exchange
Commission letter confirming the effective date of R-TEC Amended
Registration Statement.
R-TEC TECHNOLOGIES, INC.
Dated: November 12, 1999 By: __________________________
MARC M. SCOLA, ESQ.
Vice President
and General Counsel
THE BANK OF NEW YORK
Dated: November 12, 1999 By: ___________________________
HARLEY JEANTY
Vice President
