UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended February 29, 2000
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to _________
Commission File No. 0-25703
RUBBER TECHNOLOGY INTERNATIONAL, INC.
(Name of Small Business Issuer in Its Charter)
FLORIDA 59-2728052
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
3185 E. WASHINGTON BLVD.,
LOS ANGELES, CALIFORNIA 90023
(Address of Principal Executive Offices) (Zip Code)
(323) 268-6842
(Issuer's Telephone Number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
(None)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $0.0001
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 X No
----
Indicate the number of shares outstanding of each of the issuer's class of
common stock as of the latest practicable date:
Title of each class of Common Stock Outstanding as February 29, 2000
----------------------------------------- -----------------------------
Common Stock, $0.0001 par value 12,885,724
Transitional Small Business Disclosure Format (check one):
Yes No X
------
1
<PAGE>
TABLE OF CONTENTS
-----------------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets at February 28, 1999 and February 29, 2000 (Unaudited).
Statements of Operations (Unaudited) for the three months ended
February 28, 1999 and for the three months ended February 29, 2000.
Statements of Cash Flows (Unaudited) for the three months ended
February 28, 1999 and for the three months ended February 29, 2000.
Notes to Financial Statement Disclosures (Unaudited) at February 29, 2000.
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
RUBBER TECHNOLOGY INTERNATIONAL, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
FEBRUARY 28, 1999 FEBRUARY 29, 2000
------------------- -------------------
CURRENT ASSETS
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 52,315 $ 99,204
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . 18,235 40,270
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,635 43,232
------------------- -------------------
Total Current Assets. . . . . . . . . . . . . . . . . . . . . . 179,185 182,706
PROPERTY AND EQUIPMENT
Property and Equipment, net of accumulated depreciation . . . . . 865,975 783,937
OTHER ASSETS
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . 733,811 852,090
Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,500 10,813
Plant Design - Second Plant . . . . . . . . . . . . . . . . . . . 92,816 92,816
------------------- -------------------
Total Other Assets. . . . . . . . . . . . . . . . . . . . . . . 837,127 955,719
------------------- -------------------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,882,287 $ 1,922,362
=================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable. . . . . . . . . . . . . . . . . . . . . . . . . $ 51,961 $ 106,769
Current Portion of Long-Term Debt . . . . . . . . . . . . . . . . 57,180 57,180
Short Term Notes Payable. . . . . . . . . . . . . . . . . . . . . 104,819 132,229
------------------- -------------------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . 213,960 296,178
LEASE COMMITMENT (NOTE 6)
LONG-TERM LIABILITIES (NOTES 4 AND 5)
Note Payable - Equipment. . . . . . . . . . . . . . . . . . . . . 192,820 193,545
Notes Payable - Officers. . . . . . . . . . . . . . . . . . . . . 36,100 81,739
Due Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . 298,024 804,021
------------------- -------------------
526,944 1,079,305
------------------- -------------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 740,904 1,375,483
SHAREHOLDERS' EQUITY
Common Stock, $0.0001 par value, authorized 75 million shares;
Issued and outstanding at February 29, 2000, 12,885,724 shares. 990 1,289
Additional Paid-In Capital, from Sales of Common Shares . . . . . 2,115,692 2,314,744
Retained Deficit (accumulated during initial operating stage) . . (975,299) (1,769,155)
------------------- -------------------
TOTAL SHAREHOLDERS' EQUITY. . . . . . . . . . . . . . . . . . . . 1,141,383 546,878
------------------- -------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY. . . . . . . . . . . . $ 1,882,287 $ 1,922,361
=================== ===================
</TABLE>
See accompanying notes to financial statement disclosures.
3
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RUBBER TECHNOLOGY INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
THREE MONTHS THREE MONTHS
ENDED ENDED
FEBRUARY 28, 1999 FEBRUARY 29, 2000
------------------- -------------------
REVENUES
Revenues. . . . . . . . . . . . . . . . . $ 262,282 $ 105,504
COST OF GOODS SOLD
Labor . . . . . . . . . . . . . . . . . . 41,958 47,317
Repairs and Maintenance . . . . . . . . . 7,782 12,098
Trash . . . . . . . . . . . . . . . . . . 3,454 8,145
Raw Materials and Other . . . . . . . . . 7,948 13,495
------------------- -------------------
Total Cost of Goods Sold. . . . . . . . 61,142 81,055
------------------- -------------------
GROSS MARGIN. . . . . . . . . . . . . . . 201,140 24,449
SELLING, GENERAL AND ADMINISTRATIVE
Premises Rent . . . . . . . . . . . . . . 18,020 38,126
Legal and Professional. . . . . . . . . . 58,895 58,354
Research and Development. . . . . . . . . 19,500 28,500
Depreciation and Amortization . . . . . . 30,936 36,000
Utilities . . . . . . . . . . . . . . . . 11,739 12,065
Interest Expense. . . . . . . . . . . . . 44,230 10,921
Other Expenses. . . . . . . . . . . . . . 29,087 16,170
------------------- -------------------
212,407 200,136
------------------- -------------------
NET INCOME (LOSS) BEFORE TAXES ON INCOME. (11,267) (175,687)
TAXES ON INCOME . . . . . . . . . . . . . - -
------------------- -------------------
NET ORDINARY INCOME (LOSS). . . . . . . . $ (11,267) $ (175,687)
=================== ===================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING . . . . . . . . . . . . . . 9,273,387 10,956,981
=================== ===================
NET INCOME (LOSS) PER COMMON SHARE. . . . $ (0.001) $ (0.02)
=================== ===================
</TABLE>
See accompanying notes to financial statements disclosures.
4
<PAGE>
RUBBER TECHNOLOGY INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C>
THREE MONTHS THREE MONTHS
ENDED ENDED
FEBRUARY 28, 1999 FEBRUARY 29, 2000
--------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Operating Income (Loss). . . . . . . . . . . . . . $ (11,267) $ (175,687)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES
Changes in Operating Assets and Liabilities
Accounts Receivable. . . . . . . . . . . . . . . . . 54,856 (14,696)
Provision for Depreciation and Amortization. . . . . 30,936 36,000
Accounts Payable . . . . . . . . . . . . . . . . . . (30,829) (11,971)
Short Term Notes Payable . . . . . . . . . . . . . . (248,234) 18,000
--------------------- -------------------
Net Cash Provided by (Used in) Operating Activities. (204,538) (148,354)
--------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases and Installation of Equipment. . . . . . . . (8,035) (22,232)
Increase in Deposit. . . . . . . . . . . . . . . . . . (2,000) (313)
Advances to New Venture. . . . . . . . . . . . . . . . (620,292) (45,006)
--------------------- -------------------
Net Cash Provided by (Used in) Investing Activities. (630,327) (67,551)
--------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Debt Increase, Due Shareholders . . . . . . . . . . . 287,814 74,451
Debt (Decrease), Equipment Loan Funding . . . . . . . (229)
Debt (Decrease) Increase, Notes Payable - Officers. . (8,664) 12,302
Net Proceeds from Sale of Securities . . . . . . . . . 305,320 198,913
--------------------- -------------------
Net Cash Provided by Financing Activities. . . . . . 584,470 285,437
--------------------- -------------------
NET INCREASE (DECREASE) IN CASH. . . . . . . . . . . . (250,395) 69,532
CASH, beginning of period. . . . . . . . . . . . . . 302,710 29,672
------------------- -------
CASH, end of period . . . . . . . . . . . . . . $ 52,315 $99,204
=================== =======
</TABLE>
See accompanying notes to financial statement disclosures.
5
<PAGE>
RUBBER TECHNOLOGY INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENT DISCLOSURES
FEBRUARY 29, 2000
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
Rubber Technology International, Inc. (the "Company") was incorporated as
Sunshine Capital, Inc. on July 25, 1986 in the state of Florida. It commenced
operations in 1997 through the acquisition of a Nevada corporation, which had
then commenced operations in California. The Company has had limited operations
from its operational 1977 inception to February 29, 2000.
The Company is authorized to issue up to 75,000,000 shares of its $0.0001
par value common shares. The Company has completed eleven offerings of its
common shares which were exempt from federal registration under the provisions
of Regulation D, Rule 504 of the Securities Act of 1933, as amended. In the
aggregate, the Company has obtained $2,316,033 through these offerings. There
are no other authorized shares of common or preferred stock.
During the period of these financial statements, the Company completed its
production lines and initiated product sales. The Company recycles whole tires
and tire by-products into marketable commodities such as crumb rubber for
playground fill, rubberized asphalt and rubber mats and molded products such as
traffic safety devices, tree rings and various landscape products.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
The consolidated financial statements of the Company are prepared using the
accrual basis of accounting. A portion of the raw materials placed into
production comes from whole tires received by the Company. A fee is normally
paid the Company on receipt of these tires, which is directly recognized as
revenue.
All inventory items are stated at the lower of cost (first-in, first-out)
or market value. Freight costs are included as expenses.
Repair and maintenance expenses individually exceeding $500 are amortized
over the ensuing six month period.
6
<PAGE>
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES (CONTINUED)
Property, including leasehold improvements, and equipment are carried at
cost. Depreciation is provided using the straight line method over the
estimated useful life of the equipment. Leasehold improvements are amortized
over the term of the applicable lease, assuming all extensions are exercised.
The Company's main operating facility is located in an Enterprise Zone
within the City of Los Angeles. This allows for tax advantages such as labor
and investment credits and extended tax carry-overs, which are included herein.
The Company has experienced operating losses to date and evaluates its need for
a provision for federal income tax after each quarter. Income taxes for the
current years are offset by prior years losses and tax credits principally
arising from the stated Enterprise Zone credits and provisions. Its rubber
recycling facility is operated by the Nevada corporation.
All exchanges of common stock for services rendered are recorded at the
fair value of the services.
The Company has not adopted any policy regarding payment of dividends. No
dividends have been paid since inception.
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions which affect the reported amounts of assets and liabilities as of
the date of the financial statements and revenues and expenses for the period
reported. Actual results may differ from these estimates.
The Company has adopted November 30 as its fiscal year end.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and the liquidation of liabilities in the normal course of
business. However, the Company's current operations are not sufficient to cover
all its costs. Without realization of additional capital or increased
operational revenues, it would be unlikely for the Company to continue as a
going concern. It is management's plan to seek additional capital from
qualified investors under loans and private placement provisions available to it
and to increase the level of recurring revenues to cover its costs.
See Note 7, Subsequent Events. In the Company's opinion, this financing
substantially completes the required financing to establish continued profitable
rubber recycling operations.
7
<PAGE>
NOTE 4 - LONG TERM LIABILITIES
The Company is obligated under a loan which is secured by its production
assets. The loan is fully amortizing over an eighty-four month term at $4,765
per month, terminating May 2006. This loan has been personally guaranteed by a
shareholder.
Under the provisions of the long term debt agreements, the Company has the
following minimum annual payment obligations:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended February 28
2001 2002 2003
---- ---- ----
Note Payable - Equipment. . . . . . . . . $57,180 57,180 $57,180
Note Payable - Officers . . . . . . . . . 24,000 24,000 24,000
Due Shareholders. . . . . . . . . . . . . 90,000 72,000 72,000
------- ------ ------
$171,180 $153,180 $153,180
======== ======== ========
</TABLE>
NOTE 5 - RELATED PARTY TRANSACTIONS
Due shareholders consists of $804,021 due two shareholders, arising from
monetary investments, the guarantee described in Note 4, and minor services by a
shareholder, and $554,021 due an officer and shareholder, arising from monetary
investments into the Company. Certain current liabilities have been personally
guaranteed by an officer of the Company.
Other than the loans from officers and shareholders, the Company has not
engaged in related party transactions.
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their other
business interests. The Company has not formulated a policy for the resolution
of such conflicts.
8
<PAGE>
NOTE 6 - LEASE COMMITMENTS
As of February 29,, 2000, the Company is obligated under leases for its
production facilities. Future minimum lease payments, including option periods,
under these leases are:
<TABLE>
<CAPTION>
<S> <C>
Term . . . . . . . . . . . Minimum Annual Payment
-------------------------- -----------------------
March 2000 - February 2001 $ 156,100
March 2001 - February 2002 160,700
March 2002 - February 2003 170,500
March 2003 - February 2004 180,900
March 2004 - February 2005 191,500
-----------------------
$ 859,700
=======================
</TABLE>
The primary term of the facility leases ends December 2001. The Company
has an option to extend the term of these leases for an additional five years.
The leases and the options provide for cost of living increases between 3-6% per
year on the lease anniversary dates in 2000, 2002 and 2004, if extended.
Additionally, the Company is required to pay any property tax increases over the
base year.
The lease provides the Company an option to purchase the property under
market conditions.
NOTE 7 - SUBSEQUENT EVENTS
SENIOR SUBORDINATED CONVERTIBLE DEBENTURES
On March 10, 2000, the Company funded an 8% Senior Subordinated Convertible
Redeemable Debenture in the aggregate amount of $800,000, payable $400,000 at
closing and $400,000 sixty days later. These debentures were purchased at
ninety per cent of the face amount. Interest is payable monthly and the
debentures are all due March 10, 2002.
At the discretion of the holder and on notice to the Company, these
debentures are convertible into common shares of the Company at seventy five per
cent of the closing bid price as of the close of trading the day prior to
exercise of any conversion by the holder. As of May 31, 2000, the debentures
were fully funded and $225,000 of the debenture debt was converted into
2,099,390 shares of the Company's common stock.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CAUTIONARY STATEMENTS:
This Quarterly Report on Form 10-QSB contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. The Company intends that such
forward-looking statements be subject to the safe harbors created by such
statutes. The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. Accordingly, to
the extent that this Quarterly Report contains forward-looking statements
regarding the financial condition, operating results, business prospects or any
other aspect of the Company, please be advised that the Company's actual
financial condition, operating results and business performance may differ
materially from that projected or estimated by the Company in forward-looking
statements. The differences may be caused by a variety of factors, including
but not limited to adverse economic conditions, intense competition, including
intensification of price competition and entry of new competitors and products,
adverse federal, state and local government regulation, inadequate capital,
unexpected costs and operating deficits, increases in general and administrative
costs, lower sales and revenues than forecast, loss of customers, customer
returns of products sold to them by the Company, termination of contracts, loss
of supplies, technological obsolescence of the Company's products, technical
problems with the Company's products, price increases for supplies, inability to
raise prices, failure to obtain new customers, litigation and administrative
proceedings involving the Company, the possible acquisition of new businesses
that result in operating losses or that do not perform as anticipated, resulting
in unanticipated losses, the possible fluctuation and volatility of the
Company's operating results, financial condition and stock price, inability of
the Company to continue as a going concern, losses incurred in litigating and
settling cases, adverse publicity and news coverage, inability to carry out
marketing and sales plans, loss or retirement of key executives, changes in
interest rates, inflationary factors and other specific risks that may be
alluded to in this Quarterly Report or in other reports issued by the Company.
In addition, the business and operations of the Company are subject to
substantial risks that increase the uncertainty inherent in the forward-looking
statements. The inclusion of forward-looking statements in this Quarterly
Report should not be regarded as a representation by the Company or any other
person that the objectives or plans of the Company will be achieved.
The following discussion contains certain forward-looking statements that are
subject to business and economic risks and uncertainties, and the Company's
actual results could differ materially from those forward-looking statements.
The following discussion regarding the financial statements of the Company
should be read in conjunction with the financial statements and notes thereto.
GENERAL OVERVIEW
The Company's principal line of business is to recycle used tire and other used
rubber products into crumb rubber (small rubber particles of various sizes) and
molded rubber products, generally on a wholesale basis. These products are
delivered throughout the south western United States. To date, the Company's
strategy has been to build a concentrated customer base in approximately four
product lines of the many and various products available; molded goods, crumb
rubber for resale, crumb rubber for playground and arena fill and mesh rubber
for use in rubberized asphalt concrete. This strategy has allowed for an
expanding market in terms of both customers and products and has allowed the
Company to expand production levels beyond a minimum equipment level without
being limited by capacity or geographic considerations. In order to remain
competitive, the Company believes that it must continue to offer its services at
the lowest possible prices. The Company believes that in order to continue to
offer its products at the lower prices, the Company will need to acquire
additional equipment and institute operational efficiencies. Accordingly, the
Company is obtaining additional machinery through additional financing and
consulting with efficiency and industry experts in their installation and
operation.
It is believed that the market for the Company's existing products and
additional products currently being researched will be of sufficient quantity to
deliver all the rubber products the Company can produce against sales orders.
The Company intends, on a short term basis, to continue sales principally in the
south western United States. Sales are scheduled to expand to additional states
and, eventually, internationally.
The Company's revenues consist of fees received to accept tires into its
facility and sales of its produced products. Acceptance fees, called "tipping
fees", are recorded as revenue when the tires are received. All sales and
revenues are recorded on the accrual basis, where revenues are recorded when
earned/shipped to its customers. There are no advance fee or significant volume
discount arrangements.
Cost of Sales includes the operation, including maintenance, of the Company's
light and heavy equipment, the direct labor to operate this machinery and the
supplies incident to the sales and plant operations. General and administrative
expenses consist of the cost of research and development of new or enhanced
existing products, corporate expenses and all administrative personnel and
expenses to support the Company's operations and growth.
The Company, depending on the extent of its future growth, may experience
significant strain on its management, personnel, and information systems. The
Company will need to implement and improve operational, financial, and
management information systems. In addition, the Company is implementing
expanded information systems that will provide better production record-keeping,
customer service and billing. However, there can be no assurance that the
Company's management resources or information systems will be sufficient to
manage any future growth in the Company's business, and the failure to do so
could have a material adverse effect on the Company's business, results of
operations and financial condition.
10
<PAGE>
RESULTS OF OPERATIONS OF THE COMPANY
THREE MONTHS ENDED FEBRUARY 29, 2000 COMPARED TO THREE MONTHS ENDED FEBRUARY 28,
1999
REVENUES - Revenues totaled $105,504 and $262,282 for the three months ended
February 29, 2000 and February 28, 1999, respectively. During the period ended
February 29, 2000, the Company further expanded its products to additionally
include playground fill and expanded its shipped merchandise in all other
categories pursuant to its plan of operations. Primarily in the molded goods
arena, certain customer relationships have required a period of mutual research
to determine the best product materials mixture. Based on these positive
relationships, the Company is of the opinion that the volume of its shipped
products will significantly increase its product deliveries in the near future
in both its molded and crumb rubber product lines. Revenues for the three
months ended February 28, 1999 included $225,000 in management fees, pursuant to
an agreement wherein the Company provided management expertise in the
development of a potential joint venture. Revenues in the period ended February
29, 2000 were solely from the receipt of tires into production and sales of
rubber based products.
COST OF SALES - Cost of sales totaled $81,055 and $61,142 for the three month
periods ended February 29, 2000 and February 28, 1999, respectively. Cost of
sales for the period ended February 29, 2000 were comprised primarily of direct
labor costs of $47,317, disposal costs of $8,145 and equipment reconfiguration
and maintenance of $12,098. Cost of sales for the period ended February 28,
1999 were primarily comprised of direct labor costs of $41,958 and maintenance
of equipment totaling $7,782. As a percentage of total revenues, cost of sales
was 76.8% and 23.3%, resulting in apparent gross margins of 23.2% and 76.7% for
the periods ended February 29, 2000 and February 28, 1999, respectively.
Excluding the $225,000 of management revenues, the comparative cost of sales
percentages become 76.8% and a negative 163% and the gross margin comparative
percentages become 23.2% and a negative 64%. The primary reason for the
negative percentages for the period ended February 28, 1999 was the decision to
maintain a minimum, but experienced, production staff, when sales of rubber
based products at that time were inconsistent.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative ("S,G&A") expenses totaled $200,136 and $212,407, for the three
month periods ended February 29, 2000 and February 28, 1999, respectively. In
the period ended February 29, 2000, the Company completed two financing
transactions of the sale of common stock and incurred significant expenses in
these transactions. In the period ended February 28, 1999 the Company completed
equipment and one common stock financing transactions and incurred significant
expenses in these transactions. S,G&A expenses for the period ended February 29,
2000 were comprised of $58,354 legal and professional fees related primarily to
financing transactions, facilities rent of $38,126, depreciation of $36,000,
product development costs of $28,500. and officer salaries of $21,250. S.G&A
expenses for the three month period ended February 28, 1999 were comprised
primarily of professional fees of $58,895 relating to the financing referenced
above, facilities rent of $18,020, depreciation of $30,936, product research of
$19,500, officer salaries of $21,990, and interest and related expense of
$44,230 relating to the new equipment loan funding early in the period. The net
loss was $175,687and $11,267 for the three month periods ended February 29, 2000
and February 28, 1999, respectively.
ASSETS AND LIABILITIES - Assets increased from $1,882,267 as of February 28,
1999 to $1,922,362 as of February 29, 2000. The increase was attributable to
increases in the long-term investment in a formative joint venture and increases
of property and equipment of $61,962 net of $144,000 of accumulated equipment
depreciation. Liabilities increased from $740,904 as of February 28, 1999 to
$1,375,483 as of February 29, 2000. This increase was attributable to increases
in accounts payable of $54,808, increases of short-term debt of $27,410 and
$45,639 in notes due Company officers, and advances from an officer and his
family trust and one additional shareholder of $505,997.
11
<PAGE>
STOCKHOLDERS' EQUITY - Stockholders' equity decreased from $1,141,383 as of
February 28,1999 to $546,879 as of February 29, 2000. The decrease was
attributable to the incurred net loss for the year ended February 29, 2000 of
$793,855, offset by amounts raised in the Company's Rule 504 offerings of its
common stock of $199,351.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL Overall, the Company had a positive cash flow of $29,672 in three
month period ending February 29, 2000 resulting from $285,437 of cash provided
by the Company's financing activities including $198,913 in funds provided by
the sale of securities and $74,451 in loans from an officer and shareholder,
offset by $148,354 of cash used in operating activities and $67,551of cash used
in investing activities.
CASH FLOWS FROM OPERATIONS - Net cash used in operating activities of $ 148,354
in the three month period ended February 29, 2000 was primarily due to a net
loss of $175,687 and decreases in operating assets principally accounts
receivable of $14,696 and the decrease of accounts payable of $11,971, offset
partially by the increase of short term notes payable of $18,000.
CASH FLOWS FROM INVESTING - Net cash used in investing activities of $67,551 in
the three month period ended February 29, 2000 funded advances to a new joint
venture of $45,006 and purchases of equipment of $22,232.
CASH FLOWS FROM FINANCING - Net cash provided by financing activities of
$285,437 in the three month period ended February 29, 2000 was primarily due to
the proceeds from sales of the Company's common stock of $198,913 and proceeds
from borrowings from a shareholder of $74,451.
CAPITAL EXPENDITURES
The Company expended $22,232 in the three months ended February 29, 2000 to
purchase additional equipment in connection with the expansion of its business.
GOING CONCERN
The Company's independent certified public accountants have stated in their
report included in Form 10-KSB as of November 30, 1999, that the Company has
incurred operating losses in the last two years and has not established a
long-term source of revenue. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
INFLATION
Management believes that inflation has not had a material effect on the
Company's results of operations.
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YEAR 2000 DISCLOSURE
The Company has completed a review of its computer systems and non-information
technology ("non-IT") systems to identify all systems that could be affected by
the inability of many existing computer and microcontroller systems to process
time-sensitive data accurately beyond the year 1999, referred to as the Year
2000 or Y2K issue. The Company is dependent on third-party computer systems and
applications, particularly with respect to such critical tasks as accounting,
billing and the underlying carrier (AT&T) of its long distance telephone
service. The Company also relies on its own computer and non-IT systems (which
consists of personal computers, internal telephone systems, Internet server and
associated software and operating systems). In conducting the Company's review
of its internal systems, the Company performed operational tests of its systems
which revealed no Y2K problems. As a result of its review, the Company has
discovered no problems with its systems relating to the Y2K issue and believes
that such systems are Y2K compliant. Additionally, the Company has obtained
written assurances from all of its major suppliers of third-party computer
systems and applications, indicating that they have completed a review of their
respective computer systems and that such systems are Y2K compliant. Costs
associated with the Company's review were not material to its results of
operations.
While the Company believes that its procedures have been designed to be
successful, because of the complexity of the Year 2000 issue and the
interdependence of organizations using computer systems, there can be no
assurances that the Company's efforts, or those of third parties with whom the
Company interacts, have fully resolved all possible Year 2000 issues. Failure
to satisfactorily address the Year 2000 issue could have a material adverse
effect on the Company. The most likely worst case Y2K scenario which management
has identified to date is that, due to unanticipated Y2K compliance problems,
the Company may be unable to bill its customers, in full or in part, for
services used. Should this occur, it would result in a material loss of some or
all gross revenue to the Company for an indeterminable amount of time, which
could cause the Company to cease operations.
EMPLOYMENT
As of February 29, 2000, the Company had 22 full time employees.
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PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company may from time to time be involved in various claims, lawsuits,
disputes with third parties, actions involving allegations of discrimination, or
breach of contract actions incidental to the operation of its business. The
Company is not currently involved in any such litigation that it believes could
have a materially adverse effect on its financial condition or results of
operations.
ITEM 2 - CHANGES IN SECURITIES
On March 10, 2000, the Company entered into a Securities Purchase Agreement with
one accredited institutional investor pursuant to which it agreed to issue
$800,000 aggregate amount of convertible debentures. These debentures are
convertible at 75% of the bid price of the Company's common stock on the trading
day preceding the date of conversion. This offering was conducted under Rule
504 of Regulation D promulgated under Section 4(2) of the Securities Act of
1933.
On March 12, 2000, the Company entered into a Stock Exchange Agreement with an
unrelated accredited third party to acquire 100% of Global Sight, Inc., a Nevada
Corporation, in exchange for 1,200,000 shares of its restricted common stock.
The issuance was an isolated transaction not involving a public offering
pursuant to section 4(2) of the Securities Act of 1933.
During March 2000, the Company issued 800,000 shares of common stock in exchange
for consultation services rendered in connection with the acquisition of Global
Sight, Inc. The issuance was an isolated transaction not involving a public
offering pursuant to section 4(2) of the Securities Act of 1933.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the security holders for a vote during the period
covered by this report
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
27.1 Financial Data Schedule
(B) REPORTS ON FORM 8-K
On March 14, 2000, the Company filed a current report on Form 8-K dated
March 12, 2000 reporting its acquisition of Global Sight, Inc.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RUBBER TECHNOLOGY INTERNATIONAL, INC.
By /s/ Raymond Webb
----------------------------------
Raymond Webb
President & CEO
Dated: July 12, 2000
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