SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
__X__ Quarterly Report Under Section 13 or 15(d) of The
Securities Exchange Act of 1934 for the Quarterly
Period Ended: March 31, 2000.
____ Transition Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the
Transition Period From ____ to ____
Commission file number: _________
R-TEC TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-3615979
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
37 Ironica Road, Flanders, NJ 07836
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (973) 252-5233
Former name, former address and former fiscal year, if changed since last
report: NA
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. No.
Applicable only to corporate issuers
As of May 2, 2000, the Company had outstanding 3,197,410 shares of its
common stock.
<PAGE>
PART I: Financial Information
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
------ March 31, 2000
--------------
Current assets
Cash and cash equivalents $ 346,388
Prepaid expenses 35,108
----------
Total current assets 381,496
----------
Office equipment, net 8,731
Other assets
Patent, net 816,809
Deposits 6,000
----------
Total other assets 822,809
-----------
Total Assets $ 1,213,036
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Accounts payable and accrued expenses $ 118,521
Notes payable 35,000
----------
Total current liabilities 153,521
----------
Commitments and contingencies (Note 3)
Stockholders' equity
Common stock, par value $.00001 per share, 50,000,000
shares authorized, 3,197,278 shares issued and
outstanding 32
Additional paid-in capital 1,977,860
Deficit accumulated during the development stage (918,377)
-------------
Total stockholders' equity 1,059,515
-------------
Total Liabilities and Stockholders' Equity $ 1,213,036
============
F - 1
See accompanying notes to financial statements.
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Inception
(October 22, 1998)
Three-Months Ended
March 31, Through
------------------------ ---------------------
2000 1999 March 31, 2000
---- ---- --------------------
<S> <C> <C> <C>
Investment income $ 2,485 $ - $ 2,485
-------------- -------------- ---------------
Expenses
Administrative fees to stockholders 1,584 14,500 406,796
Administrative and start-up 156,020 50,629 404,011
Interest expense 6,291 12,000 43,587
Amortization and depreciation 14,104 - 66,468
---------------- ------------- ---------------
Total expenses 177,999 77,129 920,862
---------------- ------------ ---------------
Net loss $ (175,514) $ (77,129) $ (918,377)
================ ============ ===============
Net loss per common share $ (.06) $ (.03) $ (.31)
============== =========== ===============
Weighted average common shares outstanding 3,035,086 2,916,666 2,937,114
============== ========== =============
</TABLE>
See accompanying notes to financial statements
F-2
<PAGE>
.
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) In Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION> Inception
(October 22, 1998)
Three Months Ended March 31, Through
---------------------------
2000 1999 March 31, 2000
---------- -------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $ (175,514) $ (77,129) $ (918,377)
------------ ----------- ------------
Adjustments to reconcile net loss to net cash used in operating
activities:
Unreimbursed expenses contributed to capital by shareholders 1,584 14,500 350,046
Stock issued for services 3,000 - 31,000
Depreciation and amortization 14,104 - 66,469
Interest expense - amortization of discount on note payable - 12,000 35,250
Increase in prepaid assets (35,108) - (35,108)
Increase in deposits (4,000) (1,000) (6,000)
Decrease in accounts payable and accrued expenses (16,658) (611) 111,650
------------- ----------- -----------
Total adjustments (37,078) 24,889 553,307
------------- -----------
Net cash used in operating activities (212,592) (52,240) (365,070)
Cash flows from investing activities ------------ --------- -----------
Patent costs - - (69,585)
Purchase of equipment - (5,425) (9,385)
Net cash used in investing activities - (5,425) (78,970)
Cash flows from financing activities ---------- -------- ---------
Increase in deferred offering costs (19,951) (86,164) (378,839)
Proceeds from notes payable - - 80,000
Repayments of notes payable (465,000) - (465,000)
Increase in due to stockholders - - 284,491
Decrease in due to stockholders (284,491) - (284,491)
Proceeds from sale of stock 1,325,899 - 1,325,899
Capital contributed by stockholders 2,075 125,803 228,368
----------- ------- ---------
Net cash provided by financing activities 558,532 39,639 790,428
------------ ------- ----------
Net increase (decrease) in cash and cash equivalents 345,940 (18,026) 346,388
Cash and cash equivalents, beginning of period 448 43,500 -
------------ -------- -----------
Cash and cash equivalents, end of period $ 346,388 $ 25,474 $ 346,388
=========== ======== =========
Supplemental disclosures of cash flow information
Cash paid during the period for interest $ 4,750 $ - 4,750
Supplemental disclosures of noncash investing and financing
activities:
Purchase of patent with common stock and note payable - - 810,000
Issuance of common stock for repayment of debt 30,000 - 30,000
Issuance of common stock in satisfaction of obligation 428,000 - 428,000
</TABLE>
See accompanying notes and financial statements.
F-3
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
The information presented herein as of March 31, 2000, and for the three-months
ended March 31, 2000 and 1999, is unaudited.
(1) Basis of Presentation:
The accompanying financial statements of R-Tec Technologies, Inc. and subsidiary
(the Company) have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Rule 10-01 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal required adjustments)
considered necessary for a fair presentation have been included.
From inception through the current date, the Company is considered a development
stage company.
Operating results for the three-months ended March 31, 2000, are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000. For further information, refer to the financial statements and footnotes
included in the Company's annual report of Form 10-KSB for the year ended
December 31, 1999.
(2) Stock Offering:
During 1999 and 2000, the Company offered up to 1,250,000 shares of its common
stock for sale at $8.00 per share, which expected to raise between $1 to $10
million. As of March 31, 2000, 165,737 shares have been sold. During April 2000,
the offering was closed.
(3) Commitments and Contingencies:
On April 14, 1999, the Company adopted a stock bonus plan and reserved 1,000,000
shares of its authorized but unissued common stock under this plan. In March
2000, the Company issued stock options for 190,000 shares of $8.00 per share to
various employees and consultants.
In connection with the 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 9% of
the amount raised plus 2.25% of the amount raised for nonaccountable expenses
and issue warrants to purchase 12,500 shares at $13.20 per share on a pro rata
basis for each $1 million raised. Amounts due under this agreement were in
dispute and in April 2000 a settlement for $50,000 payable to the agent was
reached. This amount was accrued as of March 31, 2000 and is reflected in the
accompanying financial statements.
The Company is the defendant and plaintiff in a lawsuit with a vendor. The
vendor alleges unpaid amounts due by the Company for services rendered. The
Company has countersued for breech of contract and damages. The Company believes
the vendor's suit is without merit and is vigorously defending its position,
however there is no guarantee of a favorable outcome. The Company has not
recorded any potential liability from this matter in the accompanying financial
statements.
F-4
<PAGE>
(4) Patent Acquisition and Notes Payable:
The Company purchased a patent from a related party on December 1, 1998, the
terms of which were substantially modified in May 1999 and September 1999. In
February 2000, the Company issued 100,000 shares of the Company's common stock
and paid $450,000 in satisfaction of amounts owed under the purchase agreement.
In June 1999, the Company borrowed $60,000. The promissory note is due in full
within thirty days of $2 million being raised in the 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. As of March 31, 2000,
$15,000 in principal had been paid by the Company. Additionally, 5,000 shares of
common stock have been issued by the Company in satisfaction of $20,000 in
principal. No interest has been paid on the note.
In June 1999, the Company also borrowed $20,000. The promissory note plus
interest at 8.5% is due in full within thirty days of the completion of the
stock offering described in Note 2 or is convertible into unregistered common
stock at $4.00 per share at the option of the holder. As of March 31, 2000,
3,500 shares of common stock have been issued by the Company in satisfaction of
$10,000 in principal. No interest has been paid on the note.
(5) Net Loss Per Common Share:
Net Loss per common share is computed in accordance with the requirements of
Statement of Financial Accounting Standards No. 128 (SFAS 128). SFAS 128
requires net loss per share information to be computed using a simple weighted
average of common shares outstanding during the periods presented.
F-5
<PAGE>
Item 2. Management Discussion and Analysis or Plan of Operation
Overview
During 1999, R-Tec was a development stage company engaged in the
acquisition and development of patented technology, the development of a
business plan, arranging for potential suppliers and distribution channels and
raising capital. From inception through December 31, 1999, the Company issued
2,916,666 shares of stock to its founders. The Company's registration statement
was effective November 12, 1999, and sales commenced on January 7, 2000. R-Tec's
initial public ofering is for 1,250,000 shares of common stock to raise a
maximum of $10,000,000. Since sales commenced, we have sold 164,480 shares and
raised $1,315,840. We intend to close our offering soon and apply to trade on
the over-the-counter bulletin board. As of April 7, 2000, we have not commenced
operations and have been focusing our efforts on our initial public offering.
Once we close our initial public offering, we will focus on our business plan
set forth below
In order to achieve profitable operations, we will have to successfully
manufacture, distribute and commercialize our initial products. We will also
have to secure all intellectual property rights. For these reasons it is
difficult for R-Tec to forecast our 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.
Plan of Operation
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.
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 December, 2000 at an additional cost of $50,000.
During Phase 1, we will incur significant operating expenses. We do not
expect to generate significant operating revenues for a period of at least six
months after the completion of our offering.
During Phase 1 R-Tec will require manufacturing facilities, office
space and warehouse space. These facilities may be purchased or leased and the
manufacturing may be outsourced. We anticipate that we will remain in our
existing office space for the coming year but will be required to expend
additional funds on manufacturing and on warehouse space.
<PAGE>
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 for 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, was extended to
February, 2000. That date has been extended again until after we commence
operations. 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.
<PAGE>
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 once we close our offering. 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 with insurance
companies that underwrite risk associated with gas explosions. R-Tec will
introduce its products to these insurance companies and will attempt to persuade
them either to mandate the use of R-Tec's reactive paint products or to provide
financial incentives, such as discounted insurance rates, to companies that
utilize R-Tec's detection products.
We believe that a marketing opportunity will develop for the use of
R-Tec's reactive paint products to detect natural gas and propane leaks.
Specifically, during the installation of a gas pipe, the installer could apply
our paint to pipe joints. Property owners could also apply our reactive paint to
pipe joints in existing structures. If natural gas or propane leaks through a
stress crack, the paint is designed to change colors, indicating a leak, and
warning anyone who examines the pipe joint.
We also believe a market may exist for our reactive paint products in
chemical plants. Chemical plants utilizing our reactive paint products could
reduce the chance of significant damage caused by a toxic chemical or gas leak
by applying our products to pipe joints in their manufacturing facilities.
We also believe our reactive paint products could be used in the
aerospace and aviation markets. We believe that aircraft utilizing our reactive
paint products could possibly avert disasters caused by gas and fluid leaks if,
during a routine inspection, a mechanic notes a change in color of the paints
applied to pipe joints aboard the aircraft. Should there be a leak, it could be
detected and repaired prior to the aircraft taking off.
It is possible, though unlikely, that our paint could be caused to
change color due to exposure to some other substances or gas from another
source. A false positive reading due to ambient gases is minimized by the use of
a clear polymer coating, which encases each of the R-Tec paints. When properly
applied, the paint's impermeable coating serves to ensure that only gas leaking
from the protected source can contact the reactive paint and therefore cause a
positive reading. None of the testing conducted to date has indicated any
variance of responsiveness of R-Tec's products to geographic area or weather
conditions, such as humidity, air pressure or smog level.
<PAGE>
Phase 2-Expand Product Lines and Expand Internal Sales
R-Tec does not anticipate entering Phase 2 in our first year of
operations. 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.
R-Tec intends to initially develop only R-Tect propane reactive paint
during this Phase. Further funding will be necessary to develop additional
products.
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 it offering and the amount of funds available, if any, from operations.
Ammonia Chlorine Methane
Butane Ethane Methyl Mercaptan
Carbon Monoxide Isobutane Sulphur Hexaflouride
Acetylene Carbon Sulfide 2-Methylpropene
Acetyl Fluoride Carbon Tetrafluoride Nitric Oxide
Allene Hexafluoropropane Nitrogen
Arsine Hydrogen Nitrous Oxide
Boron Trichloride Hydrogen Chloride Other Refrigerants
Boron Trifluoride Isobutylene Phosgene
Bromotrifluoromethane Methyl Ether Propene
1,3-Butadiene Methanethiol Sulphur Dioxide
2-Methylpropane Trimthylamines
We also intend to research the feasibility of using a small strip
across the top of wrapped chicken parts and meat as a means of measuring
freshness. This fine lined strip would be the color green, indicating the
chicken is fresh. If this strip turns red, this would indicate that the chicken
is diseased or tainted with salmonella. This would alert both the retailer and
the consumer to the presence of a disease that might not have been detected
without this safety strip.
We plan 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.
<PAGE>
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 would 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.
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 three full-time employees. Two 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. We expect to hire two or three additional employees, for a total of
six full-time employees.
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 in 32 countries.
<PAGE>
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.
Our Wholly Owned Subsidiary, Ripefully Yours, Inc.
Ripefully Yours, Inc., was incorporated on July 26, 1999. On February 22,
2000, the Certificate of Incorporation for Ripefully Yours, Inc., was amended
to issue all of the outstanding stock to R-Tec.
Ripefully Yours, Inc., was formed to produce and market a product that
would remove odors and Ethyelene gas that is naturally produced in your
refrigerator by the combination of fruits and vegetables. The product was tested
by SGS U.S. Testing Laboratories in New Jersey and found to be effective.
Ripefully Yours, Inc., has entered into an agreement with Pac-Rite in Passaic,
New Jersey to manufacture and distribute the product. The product has been
offered to 50 super market chains in the Northeast. Based upon discussion with
those chains, we believe that the product will be sold in over 1,000 stores in
the next six months.
Capital Resources
We will increase our expenditures in the coming year with the continued
development and commercialization of our products. In 2000 we will begin
implementation of Phase 1 of our business plan. Additional costs will be added
for outsourcing manufacturing operations or for leasing or purchasing
manufacturing facilities. In addition, we will incur costs for the distribution
and marketing of our three initial products. Our subsidiary will incur similar
expenses for the manufacture and distribution of its initial product.
Additional resources of R-Tec have been allocated to provide salaries for
our officers. We are currently committed to two, five year employment contracts
which provide for salaries of $50,000 plus a bonus payment. The agreements
commenced in September 23, 1999 when we sold the minimum number of units in our
public offering.
On December 7, 1999, we 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 our offering. The agreement provides
that Thornhill will be paid:
o 9% of the gross proceeds of the public offering as commission.
o 2.25% of the gross proceeds of the public offering as a non-allocable
expense allowance.
o Warrants to purchase 12,500 shares for $13.20 per share for every
$1,000,000 in gross proceeds raised by the Company. The warrants will be
restricted from sale, transfer, assignment or hypothecation for one year
from January 7,2000, except to officers or partners (but not directors) of
Thornhill and members of any selling group or their officers or partners.
<PAGE>
On April 28, 2000, R-Tec reached an agreement with Thornhill Group, Inc.,
pursuant to which Thornhill will be paid $50,000 in satisfaction of all
compensation due in connection with R-Tec's public offering. As a part of the
same agreement R-Tec terminated its agreement with Stenton Leigh Capital
Corporation.
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 its offering. By letter agreement dated
July 2, 1999, Mrs. Kaiser agreed that in the event 625,000 shares 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 its offering. On or around March 16, 2000,
100,000 shares were issued and $450,000 was paid in full satisfaction of the
purchase obligation.
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 its offering. On May 26, 1999, sums due Mr.
Lacqua, Ms. Vitolo and Mr. Scola were reduced or reclassified as equity.
Item 6. Exhibits and Reports on Form 8-K
None.
(a) Exhibits
Exhibit Description Page
(2) Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession None
(4) Instruments defining the Rights of Security Holders None
(10) Material Contracts None
* (10.1) Termination Agreement with the Thornhill Group
and Stenton Leigh Capital Corporation
(11) Statement re: Computation of Per Share Earnings Note 5,
Financial
Statements
(15) Letter re: Unaudited Interim Financial Information None
(18) Letter re: Change in Accounting Principles None
(19) Report Furnished to Security Holders None
(22) Published Report re: Matters Submitted to Vote of
Security Holders None
(23) Consents of Experts and Counsel None
(24) Power of Attorney None
*(27) Financial Data Schedule
(99) Additional Exhibits None
Filed herewith.
(b) Reports on Form 8-K:
None
<PAGE>
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: May 3, 2000
/s/ PhilipLacqua
-----------------------------
Philip Lacqua, President,
CEO, CFO, Director
TERMINATION AGREEMENT
AGREEMENT made this 28th day of April, 2000, by and among R-TEC
TECHNOLOGIES, INC. ("R-Tec"); THE THORNHILL GROUP, INC. ("Thornhill"); and
STENTON LEIGH CAPITAL CORPORATION ("Stenton Leigh").
W I T N E S S E T H
WHEREAS, R-Tec and Thornhill have previously entered into a Placement
Agreement, originally dated September 21, 1999, which was subsequently modified;
and
WHEREAS, the R-Tec and Thornhill wish to terminate the Placement
Agreement, save for Section 10 providing for indemnification of certain claims
and liabilities; and
WHEREAS, R-Tec and Stenton Leigh have previously entered into a
Consulting Agreement dated September 21, 1999; and
WHEREAS, the R-Tec and Stenton Leigh wish to terminate the Consulting
Agreement, save for Paragraph 8 providing for indemnification of certain claims
and liabilities.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions contained herein, the parties agree as follows:
1. Within twenty-four (24) hours of the full execution of this
Agreement by the parties, R-Tec shall pay to Thornhill the sum of Fifty Thousand
Dollars ($50,000) and to Stenton Leigh the sum of Ten Dollars ($10.00) in full
satisfaction of all claims for compensation and reimbursement of any type
including, without limitation, warrants or options, expense reimbursements
(whether accountable or otherwise), rights of first refusal, consultant fees or
<PAGE>
the like, arising out of or in connection with the Placement Agreement and the
Consulting Agreement.
2. Except for Section 10 of the Placement Agreement and Paragraph 8 of
the Consulting Agreement, the Placement Agreement and the Consulting Agreement
are hereby terminated and without further force and effect.
R-TEC TECHNOLOGIES, INC. THE THORNHILL GROUP, INC.
/s/ Philip Lacqua /s/Lawrence Isaacson
By:_______________________________ By:_______________________
President /s/President & CEO
Title:_____________________________ Title:____________________
Date: 4/28/00 4/20/00
____________________________ Date:_____________________
STENTON LEIGH CAPITAL CORPORATION
/s/Milton H. Barbarosh
By:_______________________________
/ceo/
Title:____________________________
Date:4/20/0
___________________________________
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Financial Statements for the 3 months ended March 31, 2000, and is qualified in
its entirety by reference to such form 10QSB for three months ended March 31,
2000.
</LEGEND>
<S> <C>
<PERIOD-START> JAN-01-2000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 346,388
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 381,496
<PP&E> 12,424
<DEPRECIATION> 3,693
<TOTAL-ASSETS> 1,213,036
<CURRENT-LIABILITIES> 153,521
<BONDS> 0
<COMMON> 32
0
0
<OTHER-SE> 1,059,483
<TOTAL-LIABILITY-AND-EQUITY> 1,213,036
<SALES> 0
<TOTAL-REVENUES> 2,485
<CGS> 0
<TOTAL-COSTS> 171,708
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,291
<INCOME-PRETAX> (175,514)
<INCOME-TAX> 0
<INCOME-CONTINUING> (175,514)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (175,514)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
