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 JUNE 30, 1997
[ ] 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.
--------
(Exact name of small business issuer as specified in its charter)
NEW YORK 11-2163152
------------------------------ -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O.Box 3048, 301 Antone, Sunland Park, New Mexico 88063
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(505) 589-5431
--------------
(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.
JULY 31, 1997 - 1,481,166 shares of common stock
Transitional Small Business Disclosure Form Yes [ ] No [x]
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
RTI Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, December 31,
1997 1996
ASSETS (unaudited)
-------------------------------------- ---------- ----------
CURRENT:
Cash and cash equivalents $ 110,594 $2,578,180
Accounts receivable, net of allowance
for doubtful accounts of $1,100 in 1997 483,630 -
Restricted deposits 6,899 482,944
Inventories 2,001,105 -
Prepaid expenses and Other 134,641 27,760
Other current assets 44,651 -
--------- ---------
TOTAL CURRENT ASSETS 2,781,520 3,088,884
Property, plant and equipment,
net of accumulated depreciation and
amortization 1,828,846 476,235
Patents and Goodwill (Note 2) 1,312,914 -
Note receivable 65,000 670,000
Other assets 51,475 9,565
---------- ----------
TOTAL ASSETS $6,039,755 $4,244,684
========== ==========
See accompanying notes to consolidated financial statements.
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<PAGE>
RTI Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, December 31,
1997 1996
Liabilities and Stockholders' Equity (unaudited)
------------------------------------ ----------- ----------
CURRENT:
Accounts payable $ 521,035 $ 19,811
Short-term borrowings (Note 5) 563,000 -
Current portion of long term debt 47,106 -
Accrued expenses 194,613 74,433
------- ------
TOTAL CURRENT LIABILITIES 1,325,754 94,244
------- ------
Long-term debt, net of current portion
and discount of $11,000 and $22,000 254,118 265,000
Other liabilities (Notes 3 and 4) 946,688 970,935
TOTAL LIABILITIES 2,526,560 1,330,179
------- ------
STOCKHOLDERS' EQUITY:
Preferred stock, $.05 par value -
shares authorized 2,000,000;
issued and outstanding: 57,000 3,306 -
Common stock, $.08 par value -
shares authorized 15,000,000;
issued and outstanding, 1,481,182 118,495 88,094
Additional paid-in capital 17,431,918 16,053,542
Deficit (14,040,524) (13,227,131)
TOTAL STOCKHOLDERS' EQUITY 3,513,195 2,914,505
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 6,039,755 $ 4,244,684
=========== ===========
See accompanying notes to consolidated financial statements.
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<PAGE>
RTI Inc. and Subsidiaries
Consolidated Statements of Operations
(unaudited)
Three Months Ended
June 30,
1997 1996
---------- ----------
REVENUES
Net sales $ 1,097,635 -
Rental income 21,117 -
--------- ---------
TOTAL REVENUES 1,118,752 -
COST OF SALES 850,208 -
-------- ---------
GROSS PROFIT (LOSS) 268,544 -
OPERATING EXPENSES:
Selling, general and administrative
expenses 817,974 29,082
Product development 34,379 -
Expenses of Rockaway Industrial
Park, including interest expense
of $5,500 in 1997 and 1996 10,957 26,353
---------- ---------
LOSS FROM OPERATIONS (594,766) (55,435)
OTHER INCOME (EXPENSE):
Income (loss) from discontinued
operations (Note 6) - 85,030
Other interest income (expense) (5,974) (59,051)
Other income 7,327 5,586
--------- -----------
NET LOSS $(593,413) $ ( 23,870)
========= ===========
NET LOSS PER SHARE $ (.40) $ (.02)
========= ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,481,166 1,076,887
========= =========
See accompanying notes to consolidated financial statements.
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<PAGE>
RTI Inc. and Subsidiaries
Consolidated Statements of Operations
(unaudited)
SIX MONTHS ENDED
JUNE 30,
1997 1996
---------- ----------
REVENUES
Net sales $ 1,315,172 -
Rental income 42,045 -
--------- ---------
TOTAL REVENUES 1,357,217 -
COST OF SALES 1,175,091 -
--------- ---------
GROSS PROFIT (LOSS) 182,126 -
OPERATING EXPENSES:
Selling, general and administrative
expenses 1,050,333 59,159
Product development 47,135 -
Expenses of Rockaway Industrial
Park, including interest expense
of $11,000 in 1997 and 1996 19,051 47,610
--------- ---------
INCOME (LOSS) FROM OPERATIONS (934,393) (106,769)
OTHER INCOME (EXPENSE):
Income (loss) from discontinued
operations (Note 6) (427) 49,878
Reserve for environmental investigation
and remediation - (480,000)
Environmental insurance settlement - 580,000
Other interest income (expense) 28,014 (127,470)
Other income 46,071 17,166
--------- ---------
NET LOSS $(860,735) $ ( 67,195)
========= ==========
NET LOSS PER SHARE $ (.63) $ (.06)
========= ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,481,166 1,076,887
========= =========
See accompanying notes to consolidated financial statements.
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<PAGE>
RTI INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES: ---------- ----------
Net loss $ (860,735) $( 67,195)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 93,142 437,889
Discount of note payable 11,000 11,000
(Increase) decrease in:
Accounts receivable (483,630) (82,957)
Restricted deposits 476,045 -
Inventories (2,001,105) -
Prepaid expenses and other (151,532) (13,169)
Increase (decrease) in:
Accounts payable 501,224 48,153
Accrued expenses 120,180 (77,448)
Other liabilities ( 24,247) 293,743
-------- -------
TOTAL ADJUSTMENTS (1,458,923) 617,211
---------- -------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (2,319,658) 550,016
---------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (1,352,611) (634,971)
Reduction in notes receivable 605,000 -
Purchase of business, net of cash acquired (697,731) -
Purchase (sale) of other assets ( 41,910) 82,106
-------- -------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (1,487,252) (717,077)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in short-term borrowings 563,000 (125,000)
Changes in long term debt 25,224 ( 38,075)
Proceeds from sale of preferred stock 330,600 236,000
Proceeds from sale of common stock 420,500 43,750
Payments for fractional shares
of common stock - ( 55)
---------- -------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 1,339,324 116,620
--------- -------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (2,467,586) (50,441)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,578,180 77,631
--------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 110,594 $ 27,190
========== =========
See accompanying notes to consolidated financial statements.
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RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 1997 and 1996, and for
the three and six months then ended is unaudited)
1. BASIS OF PRESENTATION
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 June 30, 1997, its results of operations and its cash
flows for the three and six months ended June 30, 1997 and 1996.
Results of operations for the three and six month periods ended June
30, 1997 are not necessarily indicative of the results to be
expected for the year ending December 31, 1997.
Information included in the consolidated balance sheet as of
December 31, 1996 has been derived from the Company's audited
consolidated financial statements in its Annual Report on Form
10-KSB for the year ended December 31, 1996, 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. NEW OPERATIONS
With its acquisition of the business of Quality Air Inc. on
February 24, 1997, the Company is now engaged in the manufacture,
marketing and selling of residential coolers and of central air
conditioning equipment. The acquisition cost has been allocated
first to identifiable assets, with the remainder of the purchase
price assigned to goodwill, representing mainly the cost price of
patents and patent pending, which will be amortized over 15 years.
3. 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 to sell Parcel I is impaired until the completion of an
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RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 1997 and 1996, and for
the three and six months then ended is unaudited)
environmental cleanup and remediation program (Note 4), and its
ability to recover its net investment of $50,000 in 201 acres of
Parcel I is impaired by unpaid outstanding property taxes for the
years 1993, 1994, 1995, and 1996 totaling $199,373, which have been
accrued in the financial statements under "Other liabilities".
4. 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.
The Company subsequently paid additional claims by the DEP for
oversight costs through October 31, 1996.
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. On March 7, 1997, the DEP
reaffirmed its requirement that the Company comply with the ROD, but
allowed the Company to take a well water sampling in May 1997 to
determine the longer term impact of the CleanOx remediation effort.
The results of this latest sampling are being studied by the DEP and
by the Company's consultants.
The Company has also been named a respondent in environmental
proceedings relating to a New Jersey disposal site ("Nascolite") to
which the Company shipped a small amount of materials in 1978. In
May 1997, the Company paid $32,247 in settlement of EPA's Nascolite
claims.
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RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 1997 and 1996, and for
the three and six months then ended is unaudited)
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.
Environmental accruals at June 30,1997 were as follows:
Long-term ("Other liabilities"):
Groundwater remediation $747,315
5. SHORT TERM BORROWINGS
The Company borrowed $563,000 from its chairman and his
affiliate Frellum Corporation to fund the acquisition and equipment
of the Company's AC2 manufacturing facility in May and June 1997.
These loans are payable on demand and carry an interest rate of one
percent over the prime rate as published from time to time in the
Wall Street Journal, Eastern Edition.
6. 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. Results from irradiation
operations are shown as Income or Loss from discontinued operations.
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<PAGE>
RTI INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 1997 and 1996, and for
the three and six months then ended is unaudited)
7. STATEMENT OF CASH FLOWS
Supplemental disclosures of cash flow information are as
follows:
Six months ended June 30,
1997 1996
---- ----
Interest paid $ 362 $121,881
Income taxes paid - 4,985
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED JUNE 30,
1997 AND 1996.
Net sales for the three months ended June 30, 1997, were
$1,097,635, mostly from evaporative coolers. In the second quarter
of 1996, all sales were from discontinued operations, which were
eliminated from the presentation. In the 1997 quarter, the company
also had rental income of $21,117
Cost of sales of $850,208 in the 1997 period included certain
costs to prepare for the shift of manufacturing capacity from
coolers to air conditioners. In second quarter of 1996, there was no
cost of sales after elimination of the costs of the discontinued
business. Product development costs totaled $34,379 in the quarter
ended June 30, 1997; there were no such costs in 1996.
Selling, general and administrative expenses totaled $817,974
for the second quarter of 1997. In the second quarter of last year,
the Company had general and administrative expenses of $29,082 not
related to the discontinued business.
Expenses of Rockaway Industrial Park were $10,957 in the second
quarter of 1997, as compared with $26,353 in the same period last
year, when the Company incurred consulting expenses.
Because of the costs described above, the Company incurred a
loss from operations of $594,766 in the second quarter of 1997. This
compares with an operating loss of $55,435 for the same period last
year.
Other income for the three months ended June 30, 1997 consisted
of an insurance refund of $7,327 less net interest expense of
$5,974. In 1996, the company had income from discontinued operations
of $85,030, interest expense of $59,051 and rental and miscellaneous
income of $5,586.
The net loss of $593,413 or 40 cents per share for the second
quarter this year compares with a loss of $23,870 or 2 cents per
share in 1996.
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<PAGE>
COMPARISON OF OPERATIONS FOR THE SIX MONTH PERIODS ENDED JUNE 30,
1997 AND 1996.
Net sales for the six months ended June 30, 1997 were
$1,315,172, and rental income was $42,045. In the same period last
year, all of the company's sales were from discontinued operations.
Cost of sales for the first half of 1997 were $1,175,091. This
includes certain costs related to the manufacturing of the company's
new AC2 air conditioner, which received the necessary UL compliance
approval and energy efficiency rating after the end of the period
under review. In the first half of 1996, cost of goods sold were
eliminated as they were related entirely to discontinued operations.
Selling, general and administrative expenses totaled $1,050,333
for the first six months of 1997. In the same period in 1996, these
expenses were limited to corporate administration expenses, as all
other expenses related to discontinued operations.
Product development expenses were $47,135 in the first six
months of 1997. There were no such expenses in 1996.
Expenses of the Rockaway site totaled $19,051 for the first
half of 1997, as compared with $47,610 in the same period of 1996,
when the company incurred consulting expenses.
The company incurred a loss from operations of $934,393 in the
first half of 1997, as compared with an operating loss of $106,769
for the same period in 1996.
Other income for the first half of 1997 consisted of net
interest income of $28,014 and income from a litigation settlement
and an insurance refund totaling $46,071. In the same period of
1996, the company had net income from discontinued operations of
$49,878, and received an insurance settlement of $580,000, mostly
offset by an environmental remediation reserve and interest expense.
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<PAGE>
As a result of the foregoing, the company had a net loss of
$860,735 or 63 cents per share for the first half of 1997, compared
with a net loss of $67,195 or 6 cents per share in the same period
of 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the first half of 1997, the Company spent $1.5 million
for working capital in its new operations, and invested $1.4 million
in the acquisition and equipment of its El Paso, Texas AC2 air
conditioner manufacturing facility and, to a small extent in its
Juarez, Mexico fiberglass manufacturing facility.
Net cash provided by financing activities of $774,300 resulted
from the sale in private placements of 145,000 common shares of the
Company at $2.90 net per share, and 57,000 Series B Preferred Shares
at $5.80 per share.
At June 30, 1997, the Company had $110,594 in cash and
equivalent, compared to $1,270,579 at December 31, 1996.
In the second quarter, the Company borrowed $563,000 as a
demand loan from its chairman and an affiliated company at an
interest rate of one percent over the prime rate.
On July 7, 1997, the Company sold an additional 43,000 of
Series B Preferred shares at $5.80 per share. The Company also
received a verbal commitment for a loan secured by fixed assets, but
there can be no assurance that this will translate into an actual
funding of such loan. Furthermore, the company may need working
capital financing prior to next year's spring and summer selling
season. If the Company cannot obtain any such financing, it may
have to limit its operations, inventories and accounts receivable,
and hence its sales volume.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There were no new legal proceedings during the quarter.
ITEM 2. CHANGES IN SECURITIES
On June 30, 1997, the Company issued 57,000 of 9% Series B
Preferred Shares at $5.80 per share, for a total of
$330,600, in a private placement that was not registered
under the Securities Act. Said shares were sold directly
to accredited investors by the Company, without any
underwriting discounts or commissions. The Company
similarly issued another 43,000 Series B Preferred Shares
at the same price on July 7, 1997, for total net proceeds
of $249,400. Each Series B Preferred share is convertible
into two common shares and callable by the Company, at par
after June 15, 1999 if the price of the common stock
exceeds $4.75 for ten successive business days, or,
anytime, at $10 per preferred share.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K/A dated
February 24, 1997, reporting the consummation of the
acquisition of the business of Quality Air Inc. An
Amendment No.1 to this Current Report was filed with the
Securities and Exchange Commission on May 9, 1997. It
contained a Pro Forma Condensed Consolidated Balance Sheet
of the Company as of December 31, 1996.
SIGNATURE
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<PAGE>
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RTI INC.
Date: August 8, 1997 By: /s/ THEO W. MULLER
-------------------------------
Theo W. Muller
Chief Executive Officer
(Principal Executive, Financial
and Accounting 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 JUNE 30, 1997 AND
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS THEN ENDED AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000081699
<NAME> RTI INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-01-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 110,594
<SECURITIES> 0
<RECEIVABLES> 483,630
<ALLOWANCES> 6,200
<INVENTORY> 2,001,105
<CURRENT-ASSETS> 2,781,520
<PP&E> 3,459,022
<DEPRECIATION> 1,630,176
<TOTAL-ASSETS> 6,039,755
<CURRENT-LIABILITIES> 1,325,754
<BONDS> 276,000
0
3,306
<COMMON> 118,495
<OTHER-SE> 17,431,918
<TOTAL-LIABILITY-AND-EQUITY> 6,039,755
<SALES> 1,315,172
<TOTAL-REVENUES> 1,357,217
<CGS> 1,175,091
<TOTAL-COSTS> 2,291,610
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,510
<INCOME-PRETAX> (860,735)
<INCOME-TAX> 0
<INCOME-CONTINUING> (860,308)
<DISCONTINUED> (427)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (860,735)
<EPS-PRIMARY> (0.63)
<EPS-DILUTED> (0.63)
</TABLE>
