U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 SEPTEMBER 30, 1996
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________
TO ____________
Commission file number 0-5887
RTI INC.
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(Exact name of small business issuer as specified in its charter)
NEW YORK 11-2163152
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
108 Lake Denmark Road, Rockaway, New Jersey 07866
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(Address of principal executive offices) (Zip Code)
(203) 656-1004
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(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section l3 or l5(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
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
October 31, 1996 - 1,101,166 shares of common stock
Transitional Small Business Disclosure Form Yes No x
--- ---
<PAGE>
Part I. Financial Information
Item I. Financial Statements
RTI Inc. and Subsidiaries
Consolidated Balance Sheets
September 30, December 31,
1996 1995
Assets (unaudited)
-------------------------------------- ------------ -----------
Current:
Cash and cash equivalents $2,773,283 $ 77,631
Accounts receivable (net) 110,294 562,811
Prepaid expenses and other -- 31,949
Restricted deposits 805,463 15,771
---------- ----------
Total current assets 3,689,040 688,162
Property, plant and equipment,
net of accumulated depreciation and
amortization 485,532 7,006,886
Certificates of financial assurance -
restricted 75,000 150,000
Deferred financing costs -- 36,960
Other assets (Note 10) 81,002 --
---------- ----------
Total assets $4,330,574 $7,882,008
========== ==========
See accompanying notes to consolidated financial statements.
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<PAGE>
RTI Inc. and Subsidiaries
Consolidated Balance Sheets
September 30, December 31,
1996 1995
Liabilities and Stockholders' Equity (unaudited)
- ------------------------------------ ------------- -----------
Current:
Accounts payable $ 62,533 $ 138,178
Current portion of long term debt -- 1,047,264
Accrued expenses (Note 4) 250,379 618,748
------------ -----------
Total current liabilities 312,912 1,804,190
Long-term debt, net of current portion
and discount of $27,500 and $44,000
(Note 5) 259,500 2,024,050
Other liabilities (Note 6) 747,315 883,713
------------ -----------
Total liabilities 1,319,727 4,711,953
------------ -----------
Commitments and contingencies
(Notes 2,3,4,5,6 and 8)
Stockholders' equity (Note 7):
Preferred stock, $.05 par value -
shares authorized 2,000,000;
issued and outstanding: none -- --
Common stock, $.08 par value -
shares authorized 15,000,000;
issued and outstanding, 1,101,182 88,095 86,153
Additional paid-in capital 16,053,587 16,013,851
Deficit (13,130,835) (12,929,949)
------------ -----------
Total stockholders' equity 3,010,847 3,170,055
------------ -----------
Total liabilities and
stockholders' equity $ 4,330,574 $ 7,882,008
============ ===========
See accompanying notes to consolidated financial statements.
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<PAGE>
RTI Inc. and Subsidiaries
Consolidated Statements of Operations
(unaudited)
Three Months Ended September 30,
1996 1995
----------- -----------
Revenues
Interest income $ 22,273 $ 2,353
Rental income 15,512 --
----------- -----------
Total revenues 37,785 2,353
Operating expenses:
General and administrative
expenses 40,612 --
Expenses of Rockaway Industrial
Park, including interest expense
of $5,500 in 1996 and 1995 (Note 2) 114,574 115,391
Other expense (income) (Note 9) -- (144,830)
----------- -----------
Profit (loss) from continuing operations (117,401) 31,792
Discontinued operations: (Note 8)
Loss from irradiation operations -- (91,325)
Loss on disposal of irradiation
operations (16,873) --
----------- -----------
Net loss $ (134,274) $ (59,533)
=========== ===========
Net loss per share $ (.12) $ (.06)
=========== ===========
Weighted average number of common
shares outstanding (Note 7(c)) 1,101,230 1,076,919
=========== ===========
See accompanying notes to consolidated financial statements.
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<PAGE>
RTI Inc. and Subsidiaries
Consolidated Statements of Operations
(unaudited)
Nine Months Ended September 30,
1996 1995
----------- -----------
Revenues
Interest income 28,204 8,947
Rental income 21,112 --
----------- -----------
Total revenues 49,316 8,947
Operating expenses:
General and administrative
expenses 100,766 --
Expenses of Rockaway Industrial
Park, including interest expense
of $16,500 in 1996 and 1995 (Note 2) 642,183 172,268
Other expense (income) (Note 9) (580,000) (144,830)
----------- -----------
Loss from continuing operations (113,633) (18,491)
Discontinued Operations (Note 8):
Loss from irradiation operations (72,000) (317,835)
Gain (loss) on disposal of
irradiation operations (15,253) --
----------- -----------
Net loss $ (200,886) $ (336,326)
=========== ===========
Net loss per share $ (.18) $ (.31)
=========== ===========
Weighted average number of common
shares outstanding (Note 7(c)) 1,092,930 1,077,100
=========== ===========
See accompanying notes to consolidated financial statements.
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<PAGE>
RTI Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
( Note 11 )
Nine Months Ended September 30,
1996 1995
----------- ---------
Cash flows from operating activities:
Net loss $ (200,886) $(336,326)
----------- ---------
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 41,115 647,862
Allowance for doubtful accounts -- 14,500
Discount of note payable 16,500 16,506
(Increase) decrease in:
Accounts receivable (110,294) (12,124)
Restricted deposits (789,692) 23,257
Certificate of financial assurance 75,000 --
Prepaid expenses and other -- 72,574
Increase (decrease) in:
Accounts payable 16,953 (135,049)
Accrued expenses (205,557) (30,479)
Other liabilities (136,398) --
----------- ---------
Total adjustments (1,091,790) 597,047
----------- ---------
Net cash provided by (used by)
operating activities (1,293,259) 260,721
----------- ---------
Cash flows from investing activities:
Sale of irradiation operations 4,601,726 --
Purchases of fixed assets -- (48,556)
Purchases of other assets) (81,002) --
----------- ---------
Net cash provided by (used in)
investing activities 4,520,724 (48,556)
----------- ---------
Cash flows from financing activities:
Payment of debt (575,000) (252,968)
Payments on other liabilities -- (35,000)
Proceeds from exercise of warrant 43,750 --
Payments for fractional shares
of common stock (Note 8(a)) (563) (743)
----------- ---------
Net cash provided by (used in)
financing activities (531,813) (288,711)
----------- ---------
Net increase in cash and cash equivalents 2,695,652 (76,546)
Cash and cash equivalents, beginning of year 77,631 172,198
----------- ---------
Cash and cash equivalents, end of period $ 2,773,283 $ 95,652
=========== =========
See accompanying notes to consolidated financial statements.
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<PAGE>
RTI Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of September 30, 1996 and 1995, and for
the nine and three months then ended is unaudited)
1. Unaudited Information
In the opinion of management of RTI Inc. (with its Subsidiaries, the
"Company"), the accompanying unaudited consolidated financial statements include
all adjustments necessary to present fairly, in all material respects, the
Company's financial position as of September 30, 1996, its results of operations
for the three and nine months ended September 30, 1996 and 1995, and its cash
flows for the nine months ended September 30, 1996 and 1995. Results of
operations for the three and nine month periods ended September 30, 1996 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1996.
Information included in the consolidated balance sheet as of December 31,
1995 has been derived from the Company's audited consolidated financial
statements in its Annual Report on Form 10-KSB/A for the year ended December 31,
1995, to which reference is made. Certain information included in the audited
consolidated financial statements and related notes prepared in accordance with
generally accepted accounting principles may have been condensed or omitted.
2. Rockaway Industrial Park
The Company owns a 248 acre parcel of land ("Parcel I") in Rockaway, New
Jersey (47 acres of which have been leased to SteriGenics International), that
is contiguous to a 15 acre operating parcel that is the site of an irradiation
processing facility leased to SteriGenics International("Parcel II" and, with
Parcel I, the "Rockaway Industrial Park"). Since 1985, the Company has been
seeking a buyer for Parcel I. However, the Company's ability sell Parcel I is
impaired until the completion of an environmental cleanup and remediation
program (Note 3), and its ability to recover its net investment in Parcel I is
impaired by liabilities accruing from outstanding property taxes on
approximately 201 acres of Parcel I for the years 1993, 1994, 1995, and 1996,
which have been accrued in the financial statements.
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<PAGE>
RTI Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of September 30, 1996 and 1995, and for
the nine and three months then ended is unaudited)
3. Environmental Investigation and Remediation
As a result of engineering tests that commenced in 1981, the New Jersey
Department of Environmental Protection (the "DEP") issued a directive in 1986
ordering a remedial investigation and feasibility study (the "Study") designed
to determine the nature and extent of contamination on the Rockaway Industrial
Park property. The Company agreed to pay the costs of the Study and entered into
an Administrative Consent Order with the DEP. In 1989, the DEP issued a Second
Directive to pay for an additional environmental study and DEP oversight costs.
In 1993, the Company entered into an Administrative Consent Order ("ACO") with
the DEP. Cost reimbursement to the DEP under the ACO includes applicable DEP
expenditures beginning July 1, 1982 and future DEP oversight costs. In August
1996, the Company made a payment of $575,000 to the DEP as full settlement of
all outstanding claims asserted under the ACO, as well as all claims which could
be asserted for the period ended June 30, 1996 (Notes 4 and 6).
In April 1996, the DEP responded to the Company's petition to change the
Remedial Action Work Plan under the Record of Decision, and advised the Company
that a pilot test of the CleanOx remediation program, undertaken by the Company
on its Rockaway property, was not considered conclusive. In September 1996, the
Company completed a second CleanOx test, which reduced the contamination, but
did not result in remediation of the groundwater. As a result, the Company has
increased its cost accruals for the possible implementation of a groundwater
remediation plan required by the DEP's Record of Decision.
The Company has also been named a respondent in an environmental proceeding
relating to a New Jersey disposal site ("Nascolite") to which the Company
shipped a small amount of materials in 1978. The Company has signed a settlement
agreement with the EPA requiring the payment of $32,247 in settlement of the
EPA's Nascolite claims. The Company has recorded an accrual of $34,562 for this
liability and related DEP expenses.
As a result of ongoing remediation and DEP involvement in these matters,
there can be no assurances that the cleanup, remediation, and DEP oversight
accruals will represent the Company's ultimate liability.
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<PAGE>
RTI Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of September 30, 1996 and 1995, and for
the nine and three months then ended is unaudited)
Environmental accruals consisted of the following at September 30, 1996:
Current:
Nascolite Site $ 34,247
Long-term:
Groundwater remediation 747,315
--------
Total $781,562
========
4. Accrued Expenses
Accrued expenses consisted of the following at September 30 1996:
Property taxes (Note 2) $184,382
Nascolite settlement 32,247
Professional fees 33,750
--------
Total $250,379
========
5. Long-term Debt
Long-term debt consisted of the following at September 30, 1996:
Promissory Note, net of $27,500 discount $259,500
========
6. Other Liabilities
Other liabilities of $747,315 at September 30,1996 consisted of the
accruals for estimated site remediation costs, almost entirely at the Company's
Rockaway property. (Note 3)
7. Stockholders' Equity
(a) Common Stock Authorized, Issued and Outstanding - Effective May 25,
1995, the Company's Certificate of Incorporation was amended to effect a one for
eight reverse stock split of the common stock. The outstanding common stock at
September 30, 1996 was based on the
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<PAGE>
RTI Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of September 30, 1996 and 1995, and for
the nine and three months then ended is unaudited)
actual number of shares converted one for eight and the remaining unconverted
shares after deduction of estimated fractional shares.
(b) Preferred Stock Authorized, Issued and Outstanding Effective May 25,
1995, the Company's Certificate of Incorporation was amended to authorize
2,000,000 shares of preferred stock.
Effective February 27, 1996 the Company's Certificate of Incorporation was
amended to designate 200,000 of such shares as Series A Preferred Stock and to
establish the relative rights, preferences, and limitations, of the Series A
Preferred Stock. On March 4, 1996, the Company issued 118,000 shares of Series A
Preferred Stock at $2.00 per share. These shares were redeemed on August 8,
1996.
(c) Weighted Average Number of Common Shares Outstanding - The computation
of the weighted average number of common shares outstanding for the three and
nine month periods ended September 30, 1996 and 1995 considered the one for
eight reverse stock split.
(d) Warrant - On November 29, 1995, the Company granted to Frellum
Corporation (an affiliated party), in connection with a short-term credit line
provided to the Company, a warrant for the purchase of 25,000 shares of common
stock at the exercise price of $1.75 per share, which warrant was exercised on
June 7, 1996.
(e) Stock Options - The Company's 1987 stock option plan (the "Plan")
authorizes the issuance of options for common stock until November 3, 1997. The
options granted may be either incentive stock options which are exercisable one
year or more from the date of grant or nonqualified stock options which may be
exercisable immediately. Details of stock option transactions for the nine month
period ended June 30, 1996 under the Plan are as follows:
Price per Exercisable
Options Share Options
Outstanding at December 31, 1995 4,936 $4.00 - $7.76 3,686
Granted --
Exercised --
Canceled 4,936 $4.00 - $7.76 0
----------------------------------
Outstanding at September 1996 0 0
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<PAGE>
RTI Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Information as of September 30, 1996 and 1995, and for
the nine and three months then ended is unaudited)
8. Discontinued Operations
On August 8, 1996, the Company sold to SteriGenics International the assets
and liabilities related to its irradiation business, except for its Rockaway
facility, which was leased for six years to SteriGenics International. Reference
is made to the Company's Current Report of August 8, 1996 on Form 8-K/A. Losses
incurred in the Company's irradiation business until January 31, 1996 are shown
as Loss from irradiation operations and irradiation business losses incurred
thereafter are shown as Loss on disposal of irradiation operations.
9. Other Income
Extraordinary income in the nine month period of 1996 resulted from a
$580,000 settlement of prior environmental insurance claims. In the 1995
periods, extraordinary income consisted of a $144,830 litigation settlement.
10. Other Assets
Other assets of $81,002 consisted of discounted, defaulted consumer debt
and a related contract for collection of such debt.
11. Statement of Cash Flows
Supplemental disclosures of cash flow information are as follows:
Nine months ended September 30,
1996 1995
----------------- ------------
Interest paid $ 844 $192,095
Income taxes paid -- 4,985
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<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
General
Reference is made to Item 6 - "Management's Discussion and Analysis or Plan
of Operation" contained in the Company's Annual Report on Form 10-KSB/A for its
fiscal year ended December 31, 1995 (the "1995 Form 10-KSB") for a discussion of
the Company's financial condition as of December 31, 1995, including a
discussion of the Company's anticipated liquidity and working capital
requirements during 1996.
Comparison of Operations for the Three Month Periods Ended September 30, 1996
and 1995.
After the exclusion of its irradiation revenues and expenses, the Company's
revenues consisted almost entirely of short term interest on its cash assets and
lease income from the Rockaway irradiation facility leased to SteriGenics
International.
In the third quarter of 1996, the Company's expenses consisted mostly of
legal, accounting and public company costs, and of expenses and provisions
related to remediation of the groundwater contamination in the Rockaway
Industrial Park. Comparisons with last year are not meaningful because all
expenses were applied to the now discontinued operations.
Expenses of Rockaway Industrial Park at $114,574 (including an accrual of
$79,647 for future remediation expenses) in the 1996 quarter were little changed
compared to the $115,391 recorded in the 1995 quarter.
A loss of $16,873 on the sale of the irradiation business is the result of
operating losses incurred in those operations for the third quarter of 1996,
less an $18,000 premium over book value received on the sale of the assets and
liabilities related to such operations. In the 1995 period, the irradiation
operations recorded a loss of $91,325, which has been recast as a loss from
discontinued operations.
As a result of the lack of operating income and the continuation of certain
expenses, the Company had a loss of $134,274 or $0.12 per share for the third
quarter of 1996, as compared with a loss of $59,533 or $0.06 per share for the
1995 period, when the Company recorded a litigation gain of $144,830.
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<PAGE>
Comparison of Operations for the Nine Month Periods Ended September 30, 1996 and
1995
After elimination of sales and expenses for the discontinued irradiation
business, the Company's ongoing revenues consisted entirely of interest and
lease income. Total revenues for the nine months ended September 30, 1996 (the
"1996 period") were $49,316. Comparisons with the nine months ended September
30, 1995 (the "1995 period") are meaningless, as its revenue producing assets
were then concentrated in the since discontinued irradiation business.
General and administrative expenses of $100,766 in the 1996 period
consisted mainly of professional fees as well as public company maintenance
costs. In the 1995 period, general and administrative expenses were all
allocated to the now discontinued operations.
Expenses of Rockaway Industrial Park increased to $642,183 in the 1996
period, compared to $172,268 in the 1995 period. The increase was due entirely
to a reserve for future remediation costs in the 1996 period of $559,647.
Other income of $580,000 in the 1996 period represents a settlement of
prior environmental insurance claims; in the 1995 period, other income of
$144,830 consisted entirely of the proceeds of a litigation settlement.
In the 1996 period, the Company recorded a loss of $72,000 from
discontinued operations before the final decision to sell these operations and
of $15,253 from the disposal of these operations, which equates to its losses
less an $18,000 premium over book value received on the sale of its assets and
liabilities.
As a result, the Company reported a net loss of $200,886 or $.18 per share
in the 1996 period, as compared with a net loss of $336,326 or $.31 per share in
the 1995 period.
Financial Condition
At September 30, 1996, the Company had working capital of $3,376,128 as a
result of the SteriGenics transaction. At December 31, 1995, the Company had a
working capital deficit of $1,116,028.
The Company intends to use all or part of its working capital to acquire an
existing operation outside of the irradiation industry. As part of such
acquisition the Company may need
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<PAGE>
additional funding, although that is not anticipated at this time. There can be
no assurance that the Company will be successful in its acquisition efforts or,
if successful, that such acquisition will result in profitable operations.
The Company's net cash used by operating activities in the 1996 period was
$1,293,259; in the 1995 period, the discontinued irradiation business provided
cash of $260,721.
Investing activities in the 1996 period provided net cash of $4,520,724,
mainly from the sale of its irradiation business. This compared to net cash used
of $48,556 for the purchase of fixed assets in the 1995 period. Net cash used in
financing activities in the 1996 period was $531,813, which primarily resulted
from the repayment of debt, compared to $288,711 cash used in the 1995 period.
The resulting net increase in cash and cash equivalents in the 1996 period was
$2,695,652, as compared to a net decrease of $76,546 for the 1995 period.
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<PAGE>
Part II. Other Information
Item 1. Legal Proceedings - not applicable.
Item 2. Changes in Securities - none
Item 3. Defaults Upon Senior Securities - not applicable.
Item 4. Submission of Matters to a Vote of Security holders - none
Item 5. Other Information - none
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K/A during the quarter. The
Current Report was dated August 8, 1996, was filed with the Securities and
Exchange Commission in October 2, 1996, reported the consummation of the
SteriGenics transaction under Item 2 and the results of its Annual Meeting under
Item 5, and contained Unaudited Pro-Forma Condensed Consolidated Financial
Information for the period ended, and as of, June 30, 1996 under Item 7.
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<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.
RTI INC.
Date: November 13, 1996 By: THEO W. MULLER
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Theo W. Muller
President
Date: November 13, 1996 By: R. STEPHEN MAICO
----------------------------
R. Stephen Maico
Treasurer, Accounting and
Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S UNAUDITED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996
AND UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS
THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,773,283
<SECURITIES> 0
<RECEIVABLES> 110,294
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,689,040
<PP&E> 1,708,120
<DEPRECIATION> 1,302,588
<TOTAL-ASSETS> 4,330,574
<CURRENT-LIABILITIES> 312,912
<BONDS> 259,500
0
0
<COMMON> 88,095
<OTHER-SE> 16,053,587
<TOTAL-LIABILITY-AND-EQUITY> 4,330,574
<SALES> 0
<TOTAL-REVENUES> 49,316
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 162,949
<LOSS-PROVISION> 559,647
<INTEREST-EXPENSE> 16,500
<INCOME-PRETAX> (200,886)
<INCOME-TAX> 0
<INCOME-CONTINUING> (113,633)
<DISCONTINUED> (87,253)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (200,886)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)
</TABLE>
