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: June 30, 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: 333-72405
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)
(973) 252-5233
(Issuer's telephone number)
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 August 9, 2000, the Company had outstanding 3,198,360 shares of its
common stock.
<PAGE>
Index to Form 10QSB
Part I - FINANCIAL INFORMATION Page
Item 1. Financial Statements (unaudited)
Balance Sheet June 30, 2000............................4
Statements of Operations - Six Months
Ended June 30, 1999 and June 30, 2000..................5
Statements of Cash Flows - Six Months
Ended June 30, 1999 and June 30, 2000..................6
Notes to Financial Statements..........................7
Item 2. Management's Discussion and Analysis or Plan
of Operation...........................................9
Part II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.............13
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
(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...........................15
(99) Additional Exhibits.............................None
* Filed herewith.
(b) Reports on Form 8-K:
None
Signatures.....................................................3
2
<PAGE>
Signatures
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.
R-Tec Technologies, Inc.
Dated: August 10, 2000 By: /s/ Philip Lacqua
------------------------
Philip Lacqua, President
Chief Executive Officer
Chief Financial Officer
Director
3
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
R-TEC TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
------
June 30, 2000
-------------
CURRENT ASSETS
Cash and cash equivalents $ 196,426
Accounts receivable 7,696
Inventory 56,865
Prepaid expenses 9,509
-------------------
Total current assets 270,496
-------------------
EQUIPMENT, net 11,227
-------------------
OTHER ASSETS
Patent, net 807,816
Deposits 6,000
-------------------
Total other assets 813,816
-------------------
TOTAL ASSETS $ 1,095,539
===================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 55,139
Notes payable 35,000
-------------------
Total current liabilities 90,139
-------------------
COMMITMENTS AND CONTINGENCIES (NOTE 3)
STOCKHOLDERS' EQUITY
Common stock, par value $.00001 per share, 50,000,000
shares authorized, 3,198,360 shares issued and
outstanding 32
Additional paid-in capital 2,087,828
Accumulated deficit (1,082,460)
-------------------
Total stockholders' equity 1,005,400
-------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,095,539
===================
See accompanying notes to financial statements.
4
<PAGE>
R-TEC TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six-Months Ended Three-Months Ended
June 30, June 30,
--------------------------------- ----------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ----------------
<CAPTION>
<C> <C> <C> <C>
<S>
REVENUE $ 18,961 $ - $ 18,961 $ -
COST OF REVENUES 11,033 - 11,033 -
--------------- --------------- --------------- ----------------
GROSS PROFIT 7,928 - 7,928 -
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 345,661 201,674 173,953 136,545
--------------- --------------- --------------- --------------
LOSS FROM OPERATIONS (337,733) (201,674) (166,025) (136,545)
--------------- --------------- --------------- --------------
OTHER INCOME (EXPENSES)
Other income 5,171 - 2,686 -
Interest expense (7,035) (24,000) (744) (12,000)
--------------- --------------- --------------- ----------------
Total other income (expenses) (1,864) (24,000) 1,942 (12,000)
--------------- --------------- --------------- ----------------
NET LOSS $ (339,597) $ (225,674) $ (164,083) $ (148,545)
=============== =============== =============== ================
NET LOSS PER COMMON SHARE $ (.11) $ (.08) $ (.05) $ (.05)
=============== =============== =============== ================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,115,551 2,916,666 3,197,819 2,916,666
=============== =============== =============== ================
</TABLE>
See accompanying notes to financial
statements.
5
<PAGE>
R-TEC TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) In Cash and Cash Equivalents
(Unaudited)
Six-Months Ended June 30,
--------------------------------
2000 1999
--------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (339,597) $ (225,674)
--------------- ---------------
Adjustments to reconcile net loss to net
cash used in operating activities:
Unreimbursed expenses contributed to
capital by shareholders 1,584 14,500
Stock issued for services 3,000 -
Salaries contributed by stockholders 26,001 -
Depreciation and amortization 28,208 -
Interest expense - amortization of
discount on note payable - 24,000
Increase in accounts receivable (7,696) -
Increase in inventory (56,865) -
Increase in prepaid assets (9,509) -
Increase in deposits (4,000) (1,000)
Increase (decrease) in accounts
payable and accrued expenses (77,166) 52,539
Increase in due to stockholders - 22,036
--------------- ---------------
Total adjustments (96,443) 112,075
--------------- ---------------
Net cash used in operating activities (436,040) (113,599)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Patent costs (3,942) (5,945)
Purchase of equipment (6,705) (10,083)
--------------- ---------------
Net cash used in investing activities (10,647) (16,028)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease (increase) in deferred offering
costs 25,526 (126,042)
Proceeds from notes payable - 60,000
Repayments of notes payable (465,000) -
Decrease in due to stockholders (252,416) -
Proceeds from sale of stock 1,334,555 -
Capital contributed by stockholders - 169,003
--------------- ---------------
Net cash provided by financing
activities 642,665 102,961
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 195,978 (26,666)
CASH AND CASH EQUIVALENTS, beginning of
period 448 43,500
--------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 196,426 $ 16,834
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for interest $ 4,750 $ -
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for repayment
of debt 30,000 -
Issuance of common stock in satisfaction
of obligation 428,000 -
See accompanying notes to financial statements.
6
<PAGE>
R-TEC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
The information presented herein as of June 30, 2000, and for the three and
six-months ended June 30, 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.
Prior to April 1, 2000, the Company was considered a development stage
enterprise.
Operating results for the three and six-month periods ended June 30, 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. The Company sold 166,819 shares in 2000 and
the offering was closed effective June 27, 2000.
(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 at $8.00 per share to
various employees and consultants. As of June 30, 2000, no options had been
exercised.
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. The Company canceled the agreement and paid
$50,000 during the second quarter of 2000.
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.
7
<PAGE>
R-TEC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(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 June 30, 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 June 30, 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.
(6) Segments:
The Company has two segments, gas-detecting paints and household products. The
following reflects financial information about the segments as of 6/30/00:
Paints Household products
------------------- -------------------
Total assets $ 1,024,066 $ 71,473
=================== ===================
Revenues $ - $ 18,961
=================== ===================
Net loss from operations $ (312,977) $ (26,621)
=================== ===================
8
<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, the Company sold 164,480 shares
and raised $1,315,840. The offering closed.
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.
o R-Tect 12 freon leak detecting coating.
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.
o 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.
o 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.
9
<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.
The primary distributor of our protective coating products, 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.
In June, 2000, we began sales of our Ripefully Yours product, which delays
the decay of refrigerated fuits and vegetables. We received minimal revenues
from the sale of Ripefully Yours in the second quarter of this year. We
anticipate that the majority of the Company's revenues will be from the sale of
Ripefully Yours.
10
<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 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.
11
<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.
12
<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.
FORWARD-LOOKING STATEMENTS
All statements other than statements of historical fact in this report are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995, and are based on management's current expectations of the
Company's near term results, based on current information available and
pertaining to the Company. The Company assumes no obligation to update publicly
any forward-looking statement. Actual results may differ materially from those
projected in the forward-looking statements. These forward-looking statements
involve risks and uncertainties, including, but not limited to, the following:
demand for the Company's protective coatings and preservative product;
production and pricing levels of important raw materials; difficulties or delays
in the development, production, testing and marketing of products; and product
margins and customer product acceptance.
Part II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
The Company registered 1,250,000 shares of common stock on Form S-1 which was
effective January 7, 2000. As of June 30, 2000, 166,819 shares were sold in the
Company's public offering at $8.00 per share. The remaining 1,083,181 shares of
the Company's common stock were deregistered on June 27, 2000. Fifty thousand
dollars in commissions were paid to our underwriter. The proceeds were used as
working capital.
One hundred thousand shares were issued to Muriel Kaiser in satisfaction of a
promissory note for $850,000. An additional 5,750 shares were issued to George
Ardolino, Joel Duggan and Torquato Tasso for services rendered to the Company.
The share certificates contained restricted legends and were issued pursuant to
exceptions from registration under Section 4(2) of the Security Act inasmuch as
they were pursuant to private transactions.
13
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
None.
14
