SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): FEBRUARY 24, 1997
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RTI INC.
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(Exact name of registrant as specified in its charter)
NEW YORK 0-5887 11-2163152
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
P.O. BOX 3044, 301 ANTONE STREET, SUNLAND PARK, NEW MEXICO 88063
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (505) 589-5431
108 LAKE DENMARK ROAD, ROCKAWAY, NEW JERSEY 07866
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(Former name or former address, if changed since last report)
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS
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(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
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The following financial information is being filed as part of this
report:
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DESCRIPTION PAGE NO.
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Independent Auditor's Report of Little, Roberts & Co., P.C. to
the Board of Directors of Quality Air, Inc., dated March 24, 1997 F-1
December 31, 1996 Balance Sheet of Quality Air Inc. F-2
Notes to Financial Statements F-4
</TABLE>
RTI Inc. ("RTI") is unable to file audited statements of operations,
stockholders' equity and cash flows of Quality Air Inc. ("QAI") for the each of
the two years in the period ended December 31, 1996 as RTI has been advised that
sufficient back-up documentation is unavailable to permit the preparation
thereof and that such documentation is not attainable.
(b) PRO FORMA FINANCIAL INFORMATION
-------------------------------
On February 24, 1997, RTI, through its wholly-owned subsidiary,
consummated the acquisition (the "QAI Transaction") of substantially all of the
assets of QAI, upon the terms previously disclosed.
The following unaudited pro forma condensed consolidated balance sheet
is based upon RTI's audited December 31, 1996 consolidated balance sheet and has
been adjusted to give effect to the QAI Transaction. The unaudited pro forma
condensed consolidated balance sheet combines RTI's consolidated balance sheet
as of December 31, 1996 with certain adjustments described in the accompanying
notes, as if the QAI Transaction had occurred on December 31, 1996.
The unaudited pro forma condensed consolidated balance sheet does not
purport to represent RTI's actual results had the QAI Transaction occurred on or
prior to December 31, 1996. The pro forma adjustments described in the
accompanying notes give effect to available information and assumptions that RTI
management believes are reasonable. The unaudited pro forma condensed
consolidated balance sheet should be read in conjunction with RTI's historical
consolidated financial statements and the notes thereto contained in RTI's
Annual Report on Form 10-KSB for the year ended December 31, 1996.
2
<PAGE>
RTI INC.
CONDENSED CONSOLIDATED BALANCED SHEET (UNAUDITED)
DECEMBER 31, 1996
(IN THOUSANDS)
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<CAPTION>
Pro Forma
RTI Inc. & Adjustments Pro Forma,
Description Subsidiaries (Note) as adjusted
- ----------- ------------ ------ -----------
<S> <C> <C> <C>
ASSETS:
Current:
Cash and cash equivalents ....... $ 2,578 $ 51(a) $ 2,629
Accounts receivable (net) ....... -- 189(a) 189
Inventories ..................... -- 244(a) 244
Restricted deposits ............. 483 -- 483
Prepaid expenses and other ...... 28 6(a) 34
-------- -------- --------
TOTAL CURRENT ASSETS ......... 3,089 490 3,579
Property, plant & equipment ....... 476 131(a) 607
Note receivable ................... 670 (670(b) --
Due from affiliated companies ..... -- 137(a) 137
Goodwill .......................... -- 975(c) 975
Other assets ...................... 9 48(c) 58
-------- -------- --------
TOTAL ASSETS ................. $ 4,245 $ 1,111 $ 5,356
======== ======== ========
LIABILITIES:
Current:
Accounts payable ................ $ 20 $ 157(a) $ 177
Note payable .................... -- 150(a) 150
Current portion of long-term debt -- 12(a) 12
Accrued expenses ................ 74 110(a) 184
-------- -------- --------
TOTAL CURRENT LIABILITIES .... 94 429 523
Long-term debt, net ............... 265 21(a) 286
Other liabilities ................. 971 -- 971
-------- -------- --------
TOTAL LIABILITIES ............ 1,330 450 1,780
Stockholders' Equity:
Common stock .................... 88 19(d) 107
Additional paid-in capital ...... 16,054 642(d) 16,696
Deficit ......................... (13,227) -- (13,227)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY ... 2,915 661 3,576
-------- -------- --------
TOTAL LIABILITIES & ..........
STOCKHOLDERS' EQUITY ....... $ 4,245 $ 1,111 $ 5,356
======== ======== ========
</TABLE>
3
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Pro forma adjustments giving effect retroactively to the acquisition of the
assets and certain liabilities of QAI in the unaudited pro forma condensed
consolidated balance sheet reflect the following:
(a) Assets and liabilities of QAI acquired by RTI in the QAI Transactions.
This is reflected in an increase in assets and liabilities in the pro
forma balance sheet consolidation. See also notes (b) and (c).
(b) RTI had a note receivable from QAI of $670,000 on its books as of
December 31, 1996. This Note was eliminated upon the pro forma
consolidation.
(c) RTI acquired all the assets QAI, including two patents and one patent
pending which were in the name of an officer of QAI and were not
carried on the books of QAI. The acquisitions of said patents and
patent pending were accounted for in goodwill of $975,000 as of
December 31, 1996.
(d) The issuance of 235,000 shares of RTI common stock (with a market value
of $661,000 on February 24, 1997, the closing date of the QAI
Transaction) in payment of the initial purchase price for the
acquisition of certain assets, and assumption of certain liabilities,
of QAI. This is reflected in an increase in stockholders' equity in the
pro forma balance sheet consolidation.
The pro forma consolidation excludes QAI liabilities of $110,000 as of December
31, 1996 which were not assumed by RTI.
* * * * *
As set forth above, RTI is unable to file pro forma statements of
operations, stockholders' equity and cash flows for the period ended December
31, 1996 as it has been advised that sufficient back-up documentation is
unavailable to permit the preparation thereof and that such documentation is not
attainable.
4
<PAGE>
SIGNATURES
Pursuant to 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 hereunto duly authorized.
RTI INC.
By: /s/ THEO MULLER
-----------------------------
Theo W. Muller
Chairman and Chief
Executive Officer
Date: May 8, 1997
5
<PAGE>
LITTLE, ROBERTS & CO., P.C.
CERTIFIED PUBLIC ACCOUNTANTS
1200 Golden Key Circle, Suite 340
El Paso, TX 79925
INDEPENDENT AUDITOR'S REPORT
----------------------------
To the Board of Directors
Quality Air, Inc.
We have audited the accompanying balance sheet of Quality Air, Inc. as
of December 31, 1996. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As explained in Note 9, the Company entered into an acquisition
agreement subsequent to December 31, 1996.
In our opinion, the balance sheet referred to above presents fairly, in
all material respects, the financial position of Quality Air, Inc. as of
December 31, 1996, in conformity with generally accepted accounting principles.
LITTLE ROBERTS & CO., P.C.
March 24, 1997
El Paso, Texas
F-1
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QUALITY AIR, INC.
BALANCE SHEETS
DECEMBER 31, 1996
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<CAPTION>
ASSETS
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CURRENT ASSETS
Cash $ 51,549
Accounts receivable, less allowance for
uncollectible accounts of $70,614 (Note 2) 188,858
Accounts receivable, related parties (Note 9) 3,716
Inventories (Notes 1 and 3) 243,795
Prepaid expenses 2,529
--------
Total current assets 490,447
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PROPERTY AND EQUIPMENT (NOTES 1 AND 4) 151,396
Less accumulated depreciation and amortization 20,994
--------
130,402
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OTHER ASSETS
Due from related parties (Note 9) 136,625
Advance deposits 48,476
--------
Total other assets 185,101
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$805,950
========
</TABLE>
The accompanying notes are an integral part of the financial statement.
F-2
<PAGE>
QUALITY AIR, INC.
BALANCE SHEETS
DECEMBER 31, 1996
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LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
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<CAPTION>
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 153,140
Accounts payable, related parties (Note 9) 4,128
Accrued federal and state taxes 67,428
Accrued expenses 42,758
Short-term financing payable (Notes 5 and 6) 820,000
Current maturities of installment notes
payable (Note 7) 11,669
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Total current liabilities 1,099,123
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INSTALLMENT NOTES PAYABLE (NOTE 7) 32,537
Less current maturities 11,669
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20,868
OTHER LIABILITIES (NOTE 10) 110,046
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SHAREHOLDER'S EQUITY
Common stock, $100 par value; 100,000 shares
authorized; 100 shares issued and outstanding 10,000
Additional paid in capital 90,000
Retained earnings deficit (524,087)
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(424,087)
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$ 805,950
===========
</TABLE>
The accompanying notes are an integral part of the financial statement.
F-3
<PAGE>
QUALITY AIR, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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NOTE 1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
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NATURE OF OPERATION
Quality Air, Inc. "The Company", was incorporated on September 27,
1993, commenced operations on January 2, 1996, and is engaged in the
manufacturing, marketing and selling of residential coolers and central air
conditioning equipment. The Company operates one manufacturing plant located in
Sunland Park, New Mexico. In addition, the Company contracts with Maquiladora
manufacturing plants in Ciudad Juarez, Mexico for manufactured goods.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
INVENTORIES
Inventories are stated at the lower of cost or market and cost is
determined by the average cost method.
PROPERTY AND EQUIPMENT
Depreciation of property and equipment is provided primarily using the
accelerated methods. Leasehold improvements are amortized over their estimated
useful lives. Routine maintenance and repair costs are charged to current
operations as incurred. Amounts which materially increase values, capacities, or
extend lives are capitalized. On disposal of fixed assets, cost and accumulated
depreciation amounts will be removed and the resulting gain or loss included in
operations.
NOTE 2. ACCOUNTS RECEIVABLE
-------------------
All accounts receivable are pledged as collateral for short-term
financing provided by RTI, Inc.
NOTE 3. INVENTORIES
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Inventories at December 31, 1996 consist of:
Finished goods $ 73,046
Demo units 1,006
Raw materials 169,743
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Total $243,795
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F-4
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QUALITY AIR, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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Inventories are stated at the lower of cost determined by the weighted
average cost method or market. At December 31, 1996, $97,325 in raw materials
were located in Ciudad Juarez, Mexico. All remaining inventory was located in
the facilities of the Company. Substantially all inventory is pledged as
collateral for short-term financing provided by RTI, Inc.
NOTE 4. PROPERTY AND EQUIPMENT
----------------------
The following is a summary of property and equipment at cost, less
accumulated depreciation and amortization.
Manufacturing equipment $ 85,764
Office fixtures and equipment 11,388
Vehicles 41,020
Leasehold improvements 13,224
--------
151,396
Less accumulated depreciation
and amortization 20,994
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Total property and equipment $130,402
========
Vehicles with a cost of $41,020 are pledged as collateral for bank
loans. All other property and equipment are pledged as collateral for short-term
financing provided by RTI, Inc.
NOTE 5. SHORT-TERM FINANCING-RTI, INC.
------------------------------
The Company entered into a revolving credit line agreement with RTI,
Inc. Terms of the agreement provide for a maximum loan availability of $720,000,
and provides for 8.4% interest on the unpaid principal, with all unpaid
principal and accrued interest tax payable upon 30 day written demand. During
1996, the Company received $890,000 in loan advances and repayments of $300,000
were repaid to RTI, Inc. As of December 31, 1996, the outstanding principal and
interest due were $90,000 and $3,202 respectively. This credit line agreement is
secured by a lien on all accounts receivable, equipment, intangibles and
inventory of the Company. As further disclosed in these notes to financial
statements (Note 11), RTI, Inc. is a party to an acquisition agreement with the
Company dated February 24, 1997.
NOTE 6. SHORT-TERM FINANCING-THEO MULLER
--------------------------------
The Company entered into a revolving credit line agreement with Theo
Muller. Terms of the agreement provide for a maximum loan availability of
$720,000, and provides for 8.4% interest on the unpaid principal, with all
unpaid principal and accrued interest payable upon 30 day written demand. During
1996, the Company received $250,000 in loan advances and repayments of $20,000
were repaid to Theo Muller. As of December 31, 1996, the outstanding principal
and interest due were $230,000 and $169 respectively. This credit line agreement
is secured by the personal guaranty of Mr. Rick Bacchus. As further disclosed in
these notes to financial statements (Note 11), Theo Muller is an officer and
director of RTI, Inc. and Refrigerated Technology, Inc. which executed an
acquisition agreement with the Company dated February 24, 1997.
F-5
<PAGE>
QUALITY AIR, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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NOTE 7. INSTALLMENT NOTES PAYABLE
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$11,666 Note payable Citizens Bank dated August 9, 1996 payable in 48
monthly installments of $321 including interest. Secured by title lien
on vehicle. $10,973
$11,358 Note payable Citizens Bank dated August 2, 1996 payable in 48
monthly installments of $312 including interest. Secured by title lien
on vehicle. 10,682
Note payable to Government Employees Credit Union. This note was
originally provided by lender to Phillis Bacchus (a related party) on
October 26, 1992 under a vehicle purchase note. On September 1, 1996,
Quality Air, Inc. purchased the vehicle and assumed the remaining
principal balance of $4,132. This amount is payable in 14 monthly
installments of $313 including interest. 2,999
Note payable to Sunwest Bank-El Paso. This note was originally provided
by lender to Rocky Bacchus (a related party) on October 24, 1994 under
a vehicle purchase note. On September 1, 1996 Quality Air, Inc.
purchased the vehicle and assumed the remaining principal balance of
$9,133. This amount is payable in 27 monthly installments of $370
including interest. 7,833
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Total installment notes payable 32,537
Less current portion 11,669
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Non-current portion $20,868
=======
</TABLE>
Maturities on long-term debt are as follows:
YEAR ENDING
DECEMBER 31, 1996 $ 11,669
-----------------
1997 6,525
1998 9,507
1999 4,836
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$ 32,537
========
F-6
<PAGE>
QUALITY AIR, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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NOTE 8. LEASES TO RELATED PARTIES
-------------------------
The Company leases its facilities under a three year operating lease
expiring December 31, 1998. The Company pays a monthly minimum rent of $5,500
and a percentage rental of 3 percent of sales from Aireze coolers. For the year
ended December 31, 1996, the Company paid $78,323 in percentage rental. The
facilities are leased from Bacchus Industries, Inc., a corporation owned by
individuals who are also officers and directors of the Company. As of December
31, 1996, the Company has paid all rent due under the agreement.
Total future minimum rental commitment, due in future years:
1997 $ 6,600
1998 6,600
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$12,600
=======
NOTE 9. RELATED PARTY TRANSACTIONS
--------------------------
The following is a summary of balances with affiliates and related
parties as of December 31, 1996:
ASSETS
Due from related parties:
Due from Bacchus Industries, Inc. $ 13,248
Ron Bacchus 5,000
Industries Q.A.I., S.A. DE C.V. 118,377
---------
$ 136,625
=========
Accounts receivable, related parties
Due from OMS, Inc., $ 3,716
=========
LIABILITIES
Accounts payable, related parties
Due to OMS, Inc. $ 4,128
=========
NOTE 10. OTHER LIABILITIES
-----------------
The Company has received working capital advances from unrelated
private lenders. These advances do not carry provisions for interest or specific
repayment terms. The Company's management does not expect these amounts to be
repaid during the next year. Original funds advanced were $120,050 with $110,046
unpaid as of December 31, 1996.
F-7
<PAGE>
QUALITY AIR, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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NOTE 11. CONTINGENCIES
-------------
The Company is a defendant in a lawsuit filed by one of its former
employees for work related injuries. The suit asks for unspecified damages.
Outside counsel for the Company has advised that at this stage in the
proceedings he cannot offer an opinion as to the probable outcome. This company
believes the suit is without merit and is vigorously defending its position.
NOTE 12. COMMITMENTS
-----------
On February 24, 1997 the Company entered into an acquisition agreement
with Refrigeration Technologies, Inc. and RTI, Inc. Under the terms of the
agreement, the Company will transfer substantially all of its assets to
Refrigeration Technologies, Inc. in exchange for shares of common stock of RTI,
Inc. and the assumption by Refrigeration Technologies, Inc. of certain of the
Company's liabilities.
NOTE 13. SUBSEQUENT EVENTS
-----------------
The Company is a defendant in a lawsuit filed by an individual claiming
placement fees relating to the acquisition agreement with Refrigeration
Technologies, Inc. and RTI, Inc. The suit asks for unspecified damages. Outside
counsel for the Company has advised that at this stage in the proceedings he
cannot offer an opinion as to the probable outcome. The Company believes the
suit is without merit and is vigorously defending its position.
F-8
